'Tis the season ... to get your personal finances back into fighting shape.
Thanks to the country's economic nose dive and our annual holiday spending sprees, most of us could benefit from a proven, no-nonsense financial workout plan. Two of our own financial experts — Barbara H. Pietrowski, a licensed CPA and personal financial specialist, and Dave Peters, a loan officer and credit repair specialist — compiled the following "best of" list to help you build wealth, boost credit scores and harden your core financial assets in 2009.
Polish your credit file
The fastest ways to send your credit scores skyrocketing — or make them crash and burn — all have to do with credit cards.
1. Avoid opening new credit card accounts. Opening a new credit card will drop your credit score for many months. It's safe to open an account only if you are not financing a car or buying a home within the next 18 months.
2. If you must, go major. Credit cards and how they are used are important to having high credit scores. Open only major credit cards such as Visa or MasterCard.
3. Avoid store credit cards. Store cards are bad for credit scores, period. Store credit cards are considered lower-quality by credit-scoring software.
4. Low credit limits are of little value. Lower credit card limits do not help scores. Get limits of $1,000 or, preferably, $2,500 or more.
5. Consider closing your store card account. Do not close a store card if it is your oldest open credit card. An important factor in your credit scores is the depth of your credit history. If you have lots of cards, close just one a month — closing credit cards too quickly does serious harm to credit scores.
6. Don't close major credit card accounts. It won't help your score to have less credit available on credit cards. People with four to 20 open major credit cards have some of the highest scores. Four is enough; again, never close the oldest one.
7. Use the cards you have.Use each card for a purchase once every six months. If you don't, your scores will drop, and the credit card company might close the account for lack of use. That will cause a bad mark on your credit called "account closed by credit grantor."
8. Negotiate lower interest rates. Call the company and just ask, and do it often — especially if you have not been late on a payment for a couple of years. If you don't get what you want on the first try, call again the next month. Credit card banks are businesses, and they have specials, too.
9. Try for limit increases. This is especially true if your limit is under $2,500. Call the company and ask, but if you are turned down, don't stop there. One of the huge decision factors is your total household income. They'll ask, so be sure you know it.
10. Lower those balances. The following guidance generally applies:
n Keep your monthly balance below 48 percent of the credit limit for best scores. The higher the percentage of your credit limit that you use, the lower your credit scores.
n Adding 25 percent or more to your existing balance hurts your scores. That includes charging $25 on a card that has a $100 balance.
Raise your credit score
11. Pay your debts early. If you pay your credit cards, installment loans and mortgage loans as much as three weeks early for a few months' time, your scores will rise.
12. Pay more than the minimum amounts. If you can, regularly pay at least $25 per month over the minimum amount.
13. Take auto loans with payment periods of 24 to 48 months.More than 48 months harms scores. Auto leases seem to be worse than loans.
14. Frequent refinancing of home loans harms scores.
15. Keep the balance of a home equity line of credit below 48 percent of the credit limit. This type of credit acts like a credit card when it comes to scores. A "closed-end," or fixed-rate, second mortgage does not harm scores as a home equity line of credit can.
Gain financial success
16. Spend less than you make. Without this, all the other rules have no value — if you don't save, you can't invest. If you spend it all, you may have fun but you will never get rich except by accident.
17. Only a fortunate few get rich quick. The rest of us have to do it slowly. Start early, invest conservatively (but not too conservatively) and invest each month, even if it is only $50.
18. Don't dither. If you don't invest, and you aren't rich now, the only other options are to inherit money, marry money or win the lottery. What is the probability that will happen?
19. Minimize your taxes as much as possible and pay for good advice if necessary.
20. Take advantage of 401(k) plans or Thrift Savings Plans. If your employer matches some or all of your annual contribution (for example, if the company matches the first 3 percent of salary contributed each year), and you make a 3 percent tax-deductible contribution, you have doubled your investment for that year. A 100 percent profit and a tax deduction is a really good deal.
21. If you can afford to make additional retirement investments, choose an IRA.
22. Save at least 10 percent of your salary each year.
Be sure you have money in a savings account that is at least equal to three months of expenses. Six months is better.
23. Set up an emergency fund in a separate account.
24. Pay off your credit cards in full each month. Use your emergency fund to pay for things that you cannot otherwise pay for from your regular monthly income.
25. Invest in real estate. But do not use fancy financing to buy a house that you would otherwise be unable to afford.
26. Money gives you choices, and it makes life easier. It does not make you happy, and happiness has almost no relation to the amount of money you may have.
27. Think of each investment as if you were buying a business. No sensible person would buy a business that doesn't make money now and has little prospect of making money in the future.
28. If it sounds too good to be true, it always is.
29. Don't be afraid to take risks, but make your risks prudent ones. Never bet the farm on anything, no matter how good it may look at the time.
30. Smell the flowers along the way. No matter how rich you may get, you can't take it with you. Don't ever put off living until you are wealthy. Becoming wealthy may not happen, but living a full life with what you have now is something everyone can do.
31. The more you chase money, the more it eludes you. Trying for the big score tempts you into unwise investments and tends to eat away what money you have.
32. Review finances with your partner. Money is one of the most divisive elements in a relationship. It is a good idea to review with your partner how each of you feels about money, and your priorities on saving and investing.
33. If you ignore money, it will ignore you. Spending it all will leave you with a pile of useless stuff that someday your relatives will be selling at a garage sale.
34. Teach your children about money. Instead of simply providing them with money, a financial education is one of the most valuable gifts you can give.
35. Give back to others some of your good fortune. It will come back to you in ways that you will not expect.