Change Your Financial Ways With the New Year

New Year's resolutions are easy to say but hard to live up to. Yet following well-reasoned pledges for change can provide benefits for many years to come. Here are a few resolutions to consider:

Do an annual review of your spending. The big items are obvious; it's the small ones that lead to death from a thousand cuts. You can stanch the bleeding of your hard-earned money by giving up some small things that don't really matter to you. If you forgo a couple of lattes from Starbucks or dinner and drinks at a restaurant each week and put the money in a Roth IRA, you'll be surprised at how much it can add up to years down the road.

Cutting out unnecessary recurring expenses — such as monthly charges for satellite radio you don't listen to, Internet or phone data plans that you rarely use, premium cable television channels you don't watch, or gyms you don't work out at (pledging to actually go to the gym is another resolution) — can result in substantial savings. Many people aren't even aware of how much they're paying over time for these services.

Develop a consistent investing process — and the discipline to maintain it. As Warren Buffett has said, investing is like dieting: It's simple to understand but difficult to execute. What motivated you to sell or buy a given stock? Did you invest in Boeing because the company has a new plane coming out? How's that going? What was your thought process? Or was the decision driven by fear or greed, and not by rational analysis? Resolve to be aware of what's driving these decisions so that you don't repeat investing mistakes.

Conduct a portfolio review. Have your stock holdings just sat there without a critical review? Perhaps during this time, other stocks have skyrocketed. It's time to reevaluate things: You may want to rebalance your portfolio to reflect your original asset allocation, reducing risk by not having too much exposure to any one type of asset.

Because of growth in small-company stock holdings, too much of the value of your portfolio may now be in small companies and not enough in large companies. If you haven't rebalanced for years, be aware that the risks inherent in different asset classes may be different from when you originally set up your portfolio.

Take full advantage of tax-deferred retirement accounts. Most people do not contribute the maximum allowable amounts to their 401(k) plans or IRAs, nor do they contribute enough to get the maximum amounts of matching money their employers pay. The match is free money, and all contributions to the plans are tax-free until you remove money from these accounts — preferably when you're retired and in a lower tax bracket. Every dime you save in taxes is another dime you can invest for retirement.

Pay down your credit card debt. At the hurtful interest rates you're probably paying, you could be in debt forever. Regardless of whether you can make a substantial dent in this debt, you may be able to manage it better by using advisable methods for managing other types of debt. Also, credit card debt can sometimes be managed by transferring balances to new cards at zero interest. But, if not used correctly, this method can ultimately result in more debt and poorer credit.

Keep in mind that the interest-free period on must last long enough to justify the typical transfer fee of 4 percent. For example, if you're transferring the balance of a 16 percent card but only get only three months of zero interest, this gets you nowhere. If you get a year interest-free, this saves you 12 percentage points of interest that year. But you shouldn't lose sight of the fact that, after the interest-free period, the rate on the new card will become painfully high. To arrange balance transfers, you must have sufficient credit, so protect your credit by making payments on time, if at all possible. Of course, balance transfers are just a means to an end; the ultimate solution is to pay off the card.

Reassess your mortgage interest rate. If you haven't done this in the past few years, you could be throwing away hundreds or even thousands every month on an unnecessarily high mortgage payment. It's not as if this money is going in the trash can. Actually, it's being scooped up by financial institutions that are getting lower interest rates in their own financial dealings — rates on which your mortgage is based.

So instead of enriching these institutions, enrich yourself with a lower rate. Historically low interest rates continue to prevail, providing a savings opportunity. From early November until mid-December, average rates on 30-year fixed mortgages declined from about 4.24 percent to about 4.18 percent.

Taking a hard look at these issues can be unpleasant, but the satisfaction you get from cutting costs and maximizing savings and investment can help you sleep well in 2012.

Ted Schwartz, a Certified Financial Planner®, is president and chief investment officer of Capstone Investment Financial Group. He advises individual investors and endowments, and serves as the advisor to CIFG Funds. Because Schwartz has a background in psychology and counseling, he brings insights into personal motivation when advising clients on achieving their wealth management goals. Schwartz holds a B.A. from Duke University and an M.A. from Oregon State University. He can be reached at