4 challenging resolutions to make 2007 profitable

Ways to navigate choppy waters of mergers, downsizing, buyouts

Your Money

December 31, 2006|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Tough times call for tough New Year's resolutions.

The past year has been a difficult one in many respects, with record job cuts in the automotive industry and escalating layoffs in the food, chemical, media and real estate businesses.

There are positive signs as we enter 2007, though, such as declining prices for energy and other items helping to limit gains in consumer prices.

But overall, it's a year in which mergers, acquisitions, downsizing and buyout offers are expected to accelerate and financial markets are likely to remain choppy. That requires handling your hard-earned money with vigor and resolve.

Here are New Year's financial resolutions to keep:

I will be a grown-up when it comes to real estate.

Flipping was a flop in 2006, and real estate speculation should be considered only by those with financial resources to wait out the down periods. Running up a large home-equity loan also is trouble. Many mortgage loans are higher than mortgage balances as people extract money for many reasons.

Housing is expected to remain the weakest component in the nation's gross domestic product in 2007. Sales of existing homes, down nearly 9 percent in 2006, are predicted to gradually rise while new-home sales fall 17 percent, according to National Association of Realtors estimates. The one positive is that the 30-year fixed-rate mortgage has decreased to its lowest rate since March.

I will regularly monitor all my investments.

Don't micromanage, but pay close attention to your portfolio mix in each quarter of 2007. The Standard & Poor's 500 and the Russell 2000 both posted double-digit percentage gains in 2006. Many foreign markets were stronger, with developing markets faring well and riskier emerging markets soaring.

Expect a bumpy ride among the political and economic uncertainties in 2007. Large-capitalization stocks of dominant companies and stocks of foreign companies are expected to thrive. After examining where your portfolio has grown and receded, consider those two investment areas, either through mutual funds or stocks. Well-rounded assets position you to benefit from all areas and refocus on those with greater potential.

If you're parking money, the average yield on taxable money-market funds recently was about 4.75 percent, more than a full percentage point higher than a year ago, according to iMoneynet.com.

I will not live financially for the moment.

Employment is generally strong from solid corporate profits, but that wealth isn't spread evenly in fields such as construction and manufacturing. More than 3 million manufacturing jobs have been lost during the past six years, which also has a trickle-down effect that hurts ancillary businesses.

It has never been more important to have three to six months of salary set aside for emergencies. If this seems like Mount Everest, build gradually toward the three months' worth through careful budgeting.

If you find yourself the victim of corporate trauma, you may have to endure some downtime. Even a company buyout won't turn out to be worth as much as it seems, and becoming an independent contractor requires plenty of cash.

Thinking even longer term, put the maximum amount in retirement vehicles such as company 401(k) plans and look for company matching when available. You can never have too much set aside, because no one is 100 percent sure when retirement will come. Try not to use such accounts for loans, but keep them intact for their primary purpose.

I will watch my debt carefully.

It is easy to have this slip, slide away from you. Average debt of U.S. households versus disposable income hit a record 14.4 percent during 2006, according to the Federal Reserve. Meanwhile, late payments for consumer loans and credit-card debt edged upward through the year, the American Bankers Association said.

Charge as little as possible, try to pay credit-card bills in full each month and shop for the best card rates. The recent average fixed rate for credit cards of around 14.55 percent has risen from 13.76 percent a year ago, according to CardWeb.com Inc.

The best nationally available, low-rate credit cards, according to CardWeb.com, recently included Simmons First Visa Platinum of Wilmington, Del., with a fixed rate of 7.25 percent and no annual fee (800-336-8472); Bank of America Cash Rewards of Charlotte, N.C., 7.9 percent and no annual fee (800-732- 9194); and Pulaski Bank Classic of Little Rock, Ark., variable rate, 7.99 percent and a $35 annual fee (800-980-2265).

Don't bumble into 2007, but resolve to have a financial strategy and budget you will actually follow. Get your financial papers in order and also review assets listed in your will to see if they've changed. Share financial realities with family, because the future is tough to go alone no matter what the coming year will bring.

Andrew Leckey writes for Tribune Media Services.

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