12 Financial Resolutions For 2012

Now that another year has begun, are you ready to take control of your financial life?

These practical suggestions could help you do just that.

1. Draw up a budget. Spending more than you earn always ends badly, so resolve to learn to live within your means. Commit to a reasonable monthly plan that is neither unattainably strict nor just spending as usual.

2. Prioritize your debt. One budget item will be loan repayment, and while you may be locked into long-term commitments on a mortgage and car loans, you have much more control over credit-card balances and other short-term borrowing. To improve this part of your balance sheet, start with high-interest liabilities.

3. Review investment allocations. Does your portfolio mix of stocks, bonds, and other investments make sense in light of your financial goals, investing timetable, and ability to tolerate market ups and downs? Checking in now could be particularly important in today’s uncertain economic environment. (Just keep in mind that while asset allocation is a sound investment principle, but it won’t protect you from losses in declining markets.)

4. Boost your retirement nest egg. Being able to live well in retirement is an investing priority for most people, and the new year is a great time to increase payroll deductions for a 401(k) plan at work or to put more into an IRA. (Contributions for the 2011 tax year can be made until April 17, 2012.)

5. Set aside money for a rainy day. Could you cope with an unexpected emergency? Try to keep a cushion that will last three to six months.

6. Dust off old insurance policies. An annual review of life, home, and auto policies could help ensure that you have the right amount of coverage.

7. Incorporate estate tax changes. This could be the last year for generous exclusions from gift and estate tax liability, with an individual exemption for 2012 of $5.12 million. So talk with your attorney to get your estate plan is up to date.

8. Close unnecessary bank accounts. Banks have been ramping up fees, and if getting rid of unneeded accounts saved you $10 a month, say, investing the savings at an annual 7% rate could give you almost $12,000 after 30 years.

9. Go paperless with your financial records. Keeping track of bank and investment accounts electronically is faster and more secure.

10. Do what you love to do. What better time to resolve to trade a dead-end job for one that utilizes your skills and fuels your passions?

11. Educate yourself. The more you know about investing and other financial matters, the more likely you’ll make informed decisions.

12. Develop a plan. You’ll be more likely to keep your financial resolutions if you put them down in writing and track your progress throughout the year.