Financial Resolutions For The New Year

If you usually break your New Year's resolutions, Kelli Grant, Senior Consumer Reporter for SmartMoney.com, has some tips on keeping your finances in check in 2010.

First, Grant says you need to create a spending plan for the new year. "This one is key," says Grant. "If you want to stick to any other financial resolution, you really do need to understand where your money is going every month." You can't save or pay down debt if you are spending beyond your means. She suggests visiting www.Mint.com to set up a budget profile. You can even sign up for alerts so you know if you're close to exceeding your budget for the month.

Grant also suggests reading the fine print of any statements or letters you get from your bank and credit card companies in 2010. The new credit card rules are going into effect soon, so companies are trying to rework their existing agreements before tougher restrictions are in place. "The banks are raising interest rates and adding lots of nasty new fees to basically retain their profit," says Grant. Reassess your credit and debit card providers. Ask yourself, "Is this really the card for me?" If not, shop around to find one that better suits your financial needs.

You should also resolve to pay down your debt in 2010. Not only are credit issuers raising interest rates, they're switching the variable rates which are partially based on the nation's current prime rate. "[The prime rate] is at a historic low. These rates are pretty much going up," says Grant. That means credit card debt is going to become even more expensive and harder to pay off, so use any extra money you have - be it a tax rebate or birthday money - towards paying down debt. At the same time, watch your budget. Don't add to your debt while you're trying to pay it down.

Once you're debt-free, focus on your savings. Grant says you should have roughly three months worth of living expenses tucked away, but more is better. "The down economy is giving people plenty of reasons to save for a rainy day," says Grant. "You never know when you're going to end up unemployed or have other sort of financial calamity that you need that money for."

If you're already saving with a 401k or an IRA, consider converting them to a Roth account instead. "This is the first year that they're lifting the income restrictions on the Roth, so people who make more than $100,000 can actually start converting part of their regular, traditional IRA or 401k contributions into a Roth IRA," says Grant. That means that you'll pay the tax on the contributions up front, so any money in the account will be yours in full at the time of retirement. Experts say that income tax rates will probably rise in the future, so by paying tax up front, you'll be saving money in the long run.

For more information on having financial success in 2010, visit www.SmartMoney.com.

By Erin Shea