New Year Brings a Fresh Look at Personal Finances

Each January, New Year's resolutions are made. Some are lasting and life-changing - and others are never implemented. Today, I'd like to offer you the opportunity to take a fresh look at your entire financial situation and evaluate what happened in 2008 and what you'd like to see happen in 2009.

Start with the issue that is probably nagging at you most, those investments in your 401(k), IRA or at your favorite fund company. Don't simply hold on to what you have because it is what you owned last year. I've heard investors say that they aren't selling a certain investment until it comes back to what they paid for it. That philosophy has its pitfalls. The truth is that you don't know when or if it will ever get back to the level that you paid for it.

Look at your whole portfolio as if it were all cash today, and give yourself permission to rebuild the portfolio from that hypothetical all-cash starting point. If that outcome differs substantially from your actual holdings today, you should seriously consider moving things around.

Use this same approach with all of your financial issues. With life insurance, for example, don't just pay that premium because the notice came in. Evaluate your coverage: see if you have the right amount of coverage, if the beneficiary election is still appropriate, and if the policy is the best deal for you. You can use this approach with all types of insurance, such as property, auto or long-term care coverage.

With interest rates on the decline again, it soon may be time to think about refinancing your mortgage. I know that rates are only one side of the equation. The other side is your ability to qualify and the lender's willingness to make the loan. I see this loosening substantially over the next few months with money available at many local institutions.

In short, don't ever do anything financially just because that's the way you've always done things. The one thing that is certain in the world of personal finance is that things change.