NEW YORK – Being financially fit is just as important as being physically fit. So it makes sense to make — and stick to —New Year's resolutions that will slim your waistline or boost your bottom line.
Step off the scale, put down the cigarettes and fire up the spreadsheet and calculators. It's time to roll out some 2012 resolutions that will make the balances in your 401(k), 529 plan and savings account go up — and make your mortgage payments, credit card debts and investment angst go down.
Here are a few must-do resolutions to put your personal finances back on track in 2012.
Stop trading
on emotion
In 2011, it seemed as if the Dow Jones industrial average would soar 300 points one day only to swoon a few hundred points the next. Those sharp up and down swings, or "volatility," can make people super-bullish or downright scared. More often than not, investors make poor investment decisions when they let their emotions get in the way, says Michael Farr, president of money-management firm Farr Miller & Washington.
"Resist emotional trading," Farr says. "Don't let short-term volatility shake you out of your long-term investment plan. Keep saving, keep investing, keep contributing to your 401(k) no matter what."
Lower your mortgage
payments
Interest rates remain at historically low levels, with the 30-year, fixed-rate mortgage now below 4% for qualified buyers. If you haven't already, now is the time to lower your monthly payment by refinancing your current mortgage at a lower rate, says Greg McBride, senior financial analyst at Bankrate.com.
Homeowners, even those in hard-hit markets such as Florida, Arizona and Nevada who owe more on a mortgage than their home is worth, will have a better chance to refinance through the government's Home Affordable Refinance Program, or HARP, which has been enhanced and extended through the end of 2013, McBride says.
"Reducing your mortgage rate a full percentage point, from 5% to 4%, will save you roughly $120 a month on a $200,000 loan," McBride says.
Fund college 529 plans early
A coveted Ivy League education at Harvard University this year cost $52,650, and costs for college aren't going down any time soon. Start saving for Aidan and Amanda in a tax-deferred 529 as early as possible, preferably right after they're born, says Steve Janachowski of financial advisory firm Brouwer & Janachowski.
"Start saving now, as college costs keep going up," he says, adding that the sooner you invest, the more time the money has to grow.
Don't invest on news headlines
Hitting the sell or buy button in reaction to breaking news is a losing investment strategy, says Andy Brooks, head trader at mutual fund company T. Rowe Price.
"It's a loser's game," he says. "People watching the news or CNBC who have their finger on the trigger, that's a dangerous game. It's anything but investing. It's more like putting your money on 32 black at a casino."
Next time there's a news flash out of Europe that scares you, turn off the TV.
Save more for retirement
The government has boosted the maximum you can set aside in a tax-deferred 401(k) account in 2012 by $500 to $17,000. "The burden of retirement saving is increasingly falling on the individual, which means everyone has to save more," McBride says. Raise the percentage taken out of your paycheck to ensure you take advantage of the new higher savings limit. If you got a raise this year, or a bonus, plow that extra cash into your 401(k) if you're not already maxed out.
Other resolutions to consider: Stop spending foolishly and stash some money away for an emergency, such as a job loss or an unexpected car repair or medical bill, says Lewis Altfest, chief investment officer of Altfest Personal Wealth Management. To make sure you're ready when disaster strikes, he recommends having the cash deducted automatically from your paycheck into a savings account.
Daniel Seiver, a finance professor at San Diego State University, offers a few other tried-and-true personal finance tips that can also be added to your list of money-saving resolutions. "Investors should only invest money in low-cost, index mutual funds," he says, adding that the less you pay on fees the more cash you have to invest.
Lastly, Seiver recommends this resolution for everyone: "Do not run a balance on your credit cards."
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