The turning of the calendar is both arbitrary and powerful. Each day is just another day, but when the year resets we feel like the slate is cleaned and we can begin anew.
Here are five ideas to help you get a good start for 2012 — not just for a new year, but also for the start of a new decade.
1. Set up a savings plan.
Ever since the financial tsunami swept all before it in September 2008, many people have saved furiously. That's a good thing, but there's a temptation to lose that discipline once the storm clouds start to break.
While the economy remains fragile and many people are still out of work, signs of recovery are becoming more and more apparent. Among your New Year's resolutions include a savings goal that is a function of your regular income, even if it's not a large amount of money. Maintaining the discipline is crucial. The amount of savings can grow over time.
2. Build a rainy-day fund.
Advice on how to save for retirement or your kids' college is plentiful. Less plentiful is guidance on what kind of rainy-day fund you should have.
A rainy-day fund, which your savings plan can feed, should cover about six months of income. It's a form of personal insurance, valuable in these rapidly changing times.
This fund should be kept in safe and easy-to-tap assets. Laddering certificates of deposit out six months is one way.
That means buying CDs of one month, two months, etc. to six months. As each CD matures you buy another six-month CD to keep the ladder in place.
3. Migrate to a debit card or to plastic that must be paid each month.
Cutting up credit cards makes a lot of sense and eliminating all credit-card debt makes even more sense. The interest rates associated with credit-card debt can easily overwhelm the returns you can get elsewhere.
But the world is moving away from cash at a rapid clip. The notion of having no plastic is barely feasible. Try buying a plane ticket with cash and see what that sparks in the government computers.
So what kind of card to have? A debit card acts just like cash, which makes it the best option. You can spend only what you have.
Second best are charge cards that require payment in full each month. Ever since I paid off my last credit-card debt in 1996, I have only used a charge card or a debit card. It gets tough, especially around big events such as Christmas. But it's nice to not have a tempting and expensive option in the wallet.
4. Rebalance your investments.
Last year, rebalancing meant adding to stock exposure after a year of steep stock losses. That notion felt mildly crazy at the time, but it proved wise.
That's because stocks rallied from the March lows and put in a remarkably strong year. Now, most of us are probably too heavy on the stock side of the equation. Moving some of the money into bonds or even cash to regain balance would be prudent.
5. Plan to reward yourself.
New Year's resolutions usually don't stick and a big reason is that it's all like eating sawdust. Go on a diet, save money, don't spend. We start the year like ascetic monks and by February we discover that the monastic life isn't for us.
Therefore, it's important to have one resolution that is fun. A little sugar with the vinegar.
For myself, it means saving up money for a special family trip later this year. This saving is in addition to the savings plan established in the first resolution.