Resolutions for budget, credit cards, home

As we wind down 2007, certain financial trends seem to be accelerating: As a nation, we're still spending more than we earn. Credit, which has been the backbone of our ability to live beyond our means, appears to be tightening. And home values have fallen nationally (although they might be up in your particular neighborhood), eroding our home equity.

What does that mean for 2008? It may be harder to qualify for home equity loans and lines of credit to support all the consumer spending we've seen in recent years. And, if you carry a balance on your credit cards, you may pay a higher rate of interest even as the Federal Reserve lowers the federal funds rate.


If you're already living beyond your means, and your adjustable-rate mortgage (ARM) is scheduled to rise this year, you could be running into a brick wall. Since the U.S. bankruptcy laws changed several years ago, it's harder to wipe your financial slate clean.

Foreclosure or doing a "deed-in-lieu," where you give the bank the deed to your house in exchange for walking away from your mortgage obligations, aren't an easy solution either. Foreclosures are at a 21-year high, which means banks are less than happy at getting another set of house keys to hang on their office walls. There are a lot of vacant homes for sale, and while they're selling, they're not selling quickly.


So what's the answer?

Managing your financial future means taking responsibility for your major assets, including real estate, stocks and bonds, and retirement accounts. It also means spending less and saving more. And, at the bottom line, it means living within your means.

Here's my annual list of personal finance resolutions you may wish to consider implementing this year:

Put yourself on a budget. Let's start with something simple: spending less than you earn. Buy in bulk (if it's cheaper), at sales and in advance of when you'll actually need something. Cook at home more often, and use coupons if you can. Avoid take out and eating out.

Pay off your charge cards. The average American has more than $9,000 in credit card debt. That's in addition to a mortgage and a car loan. Debt isn't much of a problem unless you have financial dreams you hope to achieve. For future homeowners, every dollar you spend to pay down your charge card debt or car loan each month is a dollar less that you'll be able to put toward your monthly mortgage payment.

Pay yourself first and last. This little bit of common sense is particularly helpful if you're trying to save for a down payment or another major purchase. Each month, make out an invoice to yourself for the amount you wish you were saving. It could be $50 or $500. When you pull out your checkbook to pay your bills each month, take out the invoice and literally pay it first. Then, if you have any cash left over in your checking account at the end of your bill-paying session, pay yourself again.

Prepay your home loan. Another way to save big over time is to contribute a few extra dollars each month to your mortgage. Because of the way compounding works, every dollar you prepay saves you hundreds or thousands of dollars in interest over the life of your loan.

Refinance when interest rates drop or when your credit improves. Refinancing your loan can be a good way to find extra money in your budget each month. If you can save even $50 per month, that's $50 you can invest in yourself and your future.


Keep up with your home maintenance. If you keep your home in good shape, you'll spend less over the years than if you let little things build into big problems that need replacing instead of repairing.

Borrow down payment money from your 401(k) or IRA only as a last resort. The government allows you to withdraw up to $10,000 from an IRA account for the purchase of a first home (you'll pay taxes owed but no penalties on the withdrawal). Whether or not you can borrow any amount from your 401(k) or other retirement plan at work depends on the plan rules (check with your plan administrator).

Contribute the maximum to your retirement plan. If your employer offers you a retirement plan, sign up as quickly as possible to take full advantage of it. If your employer doesn't offer a retirement plan, open up a Roth IRA as quickly as possible.

Save your change. Every day when you get home, empty your pockets (or wallet) of change into a glass jar. After two weeks, drop the change and your lowest denomination bill into the jar. At the end of a month or two, take it to the bank. You'll be shocked by how much you'll save and how you'll never miss it.

Creating a solid financial future isn't about winning the lottery or speculating on a hot stock tip. It's about being smart with the dollars you have in your checking account at the end of the month and the change left in your pocket at the end of the day.

Contact Ilyce Glink through her Web site,, by mail at Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill. 60022 or calling her radio show at 800-972-8255 from 11 a.m. to noon Sundays.