Regain control of your finances

Dallas Morning News

DALLAS — As you plan for a more financially healthy 2010, don’t forget 2009’s key lesson. Free-wheeling, debt-hungry spending is out. Actively managing your personal finances is in.

That sea change in consumer behavior grew out of the worst economic recession since World War II, a prolonged downturn that ravaged savings and retirement accounts.

Since the recession began in December 2007, more than 7 million people have lost jobs, ballooning the unemployed number to 15.7 million.

EXAMINE YOUR GOALS

What do you want to accomplish with your money besides just making more of it?

“Financial issues are, at root, decisions about what is important to us and what is not,” said Thomas Murphy, a certified financial planner at TEMAA Financial in Dallas. “How we choose to spend our money should reflect things which are important and deeply felt, not whims or ego-supporting extravagances.”

Tracking your spending and analyzing your purchases will help you shift your resources to what’s important to you, he said.

Murphy suggested documenting every penny you spend for three months.

SET UP A SPENDING PLAN

“Give yourself an allowance with each paycheck,” said Michael Miller, certified financial planner at Miller Premier Investment Planning LLC in Mansfield. “Put your allowance in an envelope and spend it on discretionary items such as dining out, entertainment and shopping. Once the envelope is empty, you are done until the next paycheck.”

PAY DOWN DEBT

“Credit cards are great conveniences, but credit-card debt is evil,” said Mickey Cargile, a certified financial planner and managing partner at WNB Private Client Services in Midland, Texas. “You will never know personal freedom until you stop deficit spending.”

Get reacquainted with using cash. When you’re counting out dollar bills from your wallet, the price of an item hits home.

You can’t afford to max out your credit. It will harm your credit score and leave you without credit for emergencies, such as a job loss.

BOOST YOUR SAVINGS

“The lesson for 2009 is that the stuff that your mama told you turned out to be true,” Murphy said. “Spend less than you earn, and put more money aside for a rainy day because a rainy day will come.”

One convenient way to do that is to set up an automatic-savings plan — from your paycheck or your bank account — so you don’t get a chance to spend the money you’d save.

HAVE EMERGENCY PLAN

“Jobs can end at any time,” Cargile said. “Plan for the contingency of losing your job and surviving an extended unemployed period.”

Be specific in your emergency plan.

“Plan for how you will immediately cut expenses as much as possible,” Cargile said. “Cancel subscriptions and cable TV. Eat at home.”

BE HONEST

“One of the hardest things to realize is that your lifestyle just can’t be what it was before because you just can’t afford it,” Mark said. “If you’ve been touched by the recession, don’t keep living like you were two years ago, because you will continue to add debt and stress to your life.”

FOCUS ON LONG TERM

Many people bailed out of stocks in their 401(k)s when the stock market swooned. The market has since bounced back, and they missed the turnaround.

“People always get up caught up in the hype, so they react,” Mark said. “If you’ve got a long-term plan you believe in, it should serve you in good times as well as bad.”