8 tips to get finances fit in ’08

I’ve never been much for New Year’s resolutions. Why wait until the end of the year to make improvements if the urge strikes in June? And if you screw up, does that give you a license to goof off until the next year? Still, I understand the appeal of a new year equaling a new start. So with that, here are eight financial resolutions for 2008 and suggestions for how to achieve them.

Resolve to ...

1. Save more. Shave a percentage or two off of your take-home pay and redirect it into your workplace retirement plan. Or set up an automatic transfer from checking to savings of whatever small sum you can afford. If money is too tight, vow to save any miniwindfall (birthday money, for example) that you see in 2008.

2. Spend less. Don’t track your spending. Don’t ditch your credit cards. No extremes are necessary. Glance over your credit card statements, bank transactions and monthly bills and find an area or two to place on a fiscal diet. Eliminate the home phone, get rid of premium cable, eat out fewer times a week. Then save your found money.

3. Stop fretting about the stock market. Turn off the stock shows. What with the declining housing market and recession fears, 2008 is not shaping up to be a feel-good year. Why torture yourself? Daily moves on Wall Street are of little consequence to most long-term investors. Devise your strategy and stick with it. Try a U.S. total stock market index fund, an international index fund and a bond index fund. Or select a life-cycle or asset-allocation fund that uses a fund manager to pick stocks and tweak the mix for you.

4. Pay on time. Set up automatic bill pay. Or do what I do: Charge your bills if you pay your credit card balance in full each month. I earn rewards points for the transactions and it cuts down on the number of due dates I need to remember.

If you’re paying late because cash flow’s tight, automating might have the unintended consequence of triggering overdraft fees and charging bills could increase debts. Map out your payments on a calendar instead (and remember to look). Some banks offer e-bill alerts as well. Or use a free site such as www.Mint.com to remind you when bills are due.

5. Retire one day. Crossing your fingers and buying lottery tickets won’t get you there. Run the numbers. There are oodles of retirement calculators available online that will gauge your retirement readiness. Check with your retirement plan provider or try the Ballpark E$timate at www.choosetosave.org.

6. Get out of debt. First, face up to the total. Jot down the amount of your debt and the respective interest rates. Start paying it down in one of two ways: Knock off the smallest balances first so you are motivated by the progress. Or retire the costliest debts first by concentrating the most money toward the card with the highest rate and paying just the minimum on the others. When one card is back to zero, take the money you were paying on that debt and redirect it to the next one. If you’re having trouble making the change on your own, talk to a debt counselor. Find one through the National Foundation for Credit Counseling at www.nfcc.org.

7. Pay less income tax. Read our absurdly complex tax code, cover to cover. Just kidding. (Resolution for Congress: Reform it already — no joke.) Familiarize yourself with elements of the tax code relating to children, education expenses, retirement savings, homeownership, charitable giving, medical expenses and work-related expenses. You may find a tax break you’ve overlooked. Consult the Tax Topics pages at www.IRS.gov, or visit www.jklasser.com for tax planning by life stage.

8. Improve or maintain your credit score. Start with a free credit report at www.annualcreditreport.com. Ignore other sites claiming to have free reports. While you won’t get your credit score for free, scores are derived from the data on your reports. So check for accuracy and fix any mistakes.

X Kara McGuire writes about personal finance. Write to her at kara@startribune.com or at the Star Tribune, 425 Portland Ave., Minneapolis, MN 55488.