With 2 days to go until 2012, now is the time for financial goal setting.
New Year's money-saving resolutions-From USA Today
Being financially fit is just as important as being physically fit. So it makes sense to make — and stick to —New Year's resolutions that will slim your waistline or boost your bottom line.
Step off the scale, put down the cigarettes and fire up the spreadsheet and calculators. It's time to roll out some 2012 resolutions that will make the balances in your 401(k), 529 plan and savings account go up — and make your mortgage payments, credit card debts and investment angst go down.
Here are a few must-do resolutions to put your personal finances back on track in 2012.
1. Stop trading on emotion
In 2011, it seemed as if the Dow Jones industrial average would soar 300 points one day only to swoon a few hundred points the next. Those sharp up and down swings, or "volatility," can make people super-bullish or downright scared. More often than not, investors make poor investment decisions when they let their emotions get in the way, says Michael Farr, president of money-management firm Farr Miller & Washington.
"Resist emotional trading," Farr says. "Don't let short-term volatility shake you out of your long-term investment plan. Keep saving, keep investing, keep contributing to your 401(k) no matter what."
2. Lower your mortgage payments
Interest rates remain at historically low levels, with the 30-year, fixed-rate mortgage now below 4% for qualified buyers. If you haven't already, now is the time to lower your monthly payment by refinancing your current mortgage at a lower rate, says Greg McBride, senior financial analyst at
Bankrate.com.
Homeowners, even those in hard-hit markets such as Florida, Arizona and Nevada who owe more on a mortgage than their home is worth, will have a better chance to refinance through the government's Home Affordable Refinance Program, or HARP, which has been enhanced and extended through the end of 2013, McBride says.
"Reducing your mortgage rate a full percentage point, from 5% to 4%, will save you roughly $120 a month on a $200,000 loan," McBride says.
3. Fund college 529 plans early
A coveted Ivy League education at Harvard University this year cost $52,650, and costs for college aren't going down any time soon. Start saving for Aidan and Amanda in a tax-deferred 529 as early as possible, preferably right after they're born, says Steve Janachowski of financial advisory firm Brouwer & Janachowski.
"Start saving now, as college costs keep going up," he says, adding that the sooner you invest, the more time the money has to grow.
4. Don't invest on news headlines
Hitting the sell or buy button in reaction to breaking news is a losing investment strategy, says Andy Brooks, head trader at mutual fund company T. Rowe Price.
"It's a loser's game," he says. "People watching the news or CNBC who have their finger on the trigger, that's a dangerous game. It's anything but investing. It's more like putting your money on 32 black at a casino."
Next time there's a news flash out of Europe that scares you, turn off the TV.
5. Save more for retirement
The government has boosted the maximum you can set aside in a tax-deferred 401(k) account in 2012 by $500 to $17,000. "The burden of retirement saving is increasingly falling on the individual, which means everyone has to save more," McBride says. Raise the percentage taken out of your paycheck to ensure you take advantage of the new higher savings limit. If you got a raise this year, or a bonus, plow that extra cash into your 401(k) if you're not already maxed out.
Other resolutions to consider: Stop spending foolishly and stash some money away for an emergency, such as a job loss or an unexpected car repair or medical bill, says Lewis Altfest, chief investment officer of Altfest Personal Wealth Management. To make sure you're ready when disaster strikes, he recommends having the cash deducted automatically from your paycheck into a savings account.
Daniel Seiver, a finance professor at San Diego State University, offers a few other tried-and-true personal finance tips that can also be added to your list of money-saving resolutions. "Investors should only invest money in low-cost, index mutual funds," he says, adding that the less you pay on fees the more cash you have to invest.
Lastly, Seiver recommends this resolution for everyone: "Do not run a balance on your credit cards."
2) In the Markets today:
Stocks up after new home contracts rise and unemployment claims suggest hiring could pick up
Stocks up on new home deals, job growth prospects-From AP
Better news on home sales and improved prospects for job growth sent stocks higher on Wall Street Thursday.
The Dow Jones industrial average rose 135 points, nearly making up its 140-point loss from the day before. The S&P 500 edged back into the black for 2011, with just one more day of trading left in the year.
The four-week average of unemployment claims fell to a three-and-a-half-year low, an indication that hiring could pick up. Also, the number of Americans who signed contracts to buy homes in November rose more than 7 percent to the highest level in a year and a half, according to the National Association of Realtors.
Quincy Krosby, Prudential Financial's market strategist, said the reports were encouraging signals for the economy going in to 2012.
"The correlation between jobs and housing has been crystal-clear this year,"
Krosby said the correlation has become more pronounced after the real estate bust, when lenders became reluctant to even consider customers for a mortgage unless they held jobs. She said it's a noticeable trend in many cities nationwide.
For instance, Boston's 1.1 percent drop in home prices since last year was one of the lowest among metro areas tracked by S&P/Case-Shiller index. The city's unemployment rate is 6.2 percent, much lower than the national average of 8.6 percent.
The positive housing news sent the stocks of home builders sharply higher. Masco Corp. soared 8.4 percent, the most in the S&P 500. PulteGroup Inc. rose 6 percent and Lennar Corp. gained 4.6 percent.
The Dow closed at 12,287.04, a gain of 135.63 points, or 1.1 percent. For the year, the Dow is up 709 points, or 6 percent.
The S&P 500 rose 13.38 points, or 1.07 percent, to 1,263.02. That's just 5 points above where the index started the year.
The technology-heavy Nasdaq composite rose 23.76 points, or 0.92 percent, to 2,613.74. The index if down 39 points for the year.
Trading was very light as investors get ready to close the books on 2011. Markets will be closed Monday in observance of New Year's Day, which falls on Sunday.
Volume on the New York Stock Exchange was 2 billion shares, less than half of its recent average. Gaining stocks led losing ones four-to-one.
The euro fell to its lowest level against the dollar in more than a year and its lowest against the Japanese yen in a decade. The euro went as low as $1.28 versus the dollar, its weakest since September 2010.
Investors continued to be worried that Italy's 10-year borrowing rate remains uncomfortably close to 7 percent, a level that economists consider unsustainable. Greece, Ireland and Portugal all had to seek relief from their creditors after their 10-year bond yields rose above 7 percent.
Italy paid 6.98 percent on a 10-year bond auction where it raised $3.3 billion. That's lower than the 7.56 percent it had to pay at an equivalent auction last month, but not low enough to assuage investors.
Italy's new premier said his government has more to do before it convinces financial markets it can manage the heavy debts that have made it the focus of the euro zone crisis.
In other corporate news:
— Chesapeake Midstream Partners rose 5 percent after the natural gas systems operator agreed to acquire Chesapeake Energy Corp.'s pipeline business.
— Hill International Inc. rose 3 percent after the construction management company was awarded a $3.3 million contract to build a new stadium in Iraq.
— Sears Holdings Corp. fell 1 percent as investors worried over the fate of the retailer, two days after it said it was closing over 100 stores nationwide.
3) Top financial story of the day:
The long-suffering job market is ending the year better off than it began.The number of people applying for unemployment benefits each week has dropped by 10 percent since January.
Data Suggest Recovery Gaining Steam-From The Wall Street Journal
Fewer Americans are filing new claims for jobless benefits than at any time since the end of the recession, the latest signal that the U.S. economy is ending a year of uncertainty on a positive note.
The Department of Labor said Thursday that a seasonally adjusted 381,000 people filed for unemployment benefits for the first time last week. That figure was up slightly from the prior week, but the four-week average, which is more closely watched by economists because it smooths out weekly volatility, fell to its lowest level since June 2008, when the economy was still mired in recession.
The unemployment data, along with other positive figures from the housing and manufacturing sectors, suggest that the economic recovery is once again gaining momentum after nearly stalling out earlier this year. Fears of a return to recession crested over the summer but ebbed in recent months, as statistics have consistently shown the economy keeps growing, albeit slowly.
"We continue to hear people say that the U.S. recovery is fragile, and that's the wrong word," said Michael Gapen, an economist with Barclays Capital. "It's durable. It's just not robust. It's a moderate expansion."
The declining number of new unemployment claims only indicates that fewer people are losing their jobs, not that more people are being hired. Nonetheless, economists said the weekly figures were a positive sign for the December employment report, which will provide a more detailed snapshot of the state of the labor market when released next week.
Other parts of the economy are also showing signs of strength. Manufacturing activity in the Midwest stayed generally steady in December after rising sharply in November, according to a report Thursday from the Institute for Supply Management, a business group.
The National Association of Realtors said Thursday that its pending-home-sales index rose in November to the highest level since in more than a year and a half. The index, which measures contracts to sell existing homes and is considered an indicator of future sales activity, rose for the third consecutive month after falling over the summer, and was up 5.9% from November 2010. The increase is the latest sign of life in the moribund housing market, following recent reports that home construction is picking up and that sales of both new and existing homes are also on the rise.
Separate reports earlier this week showed shoppers spending more and becoming more confident heading into the new year.
But some experts cautioned that the economy was sending similarly positive signals a year ago before a series of events—the earthquake in Japan, the onset of the European debt crisis, and later, the debt-ceiling battle in Washington, among other factors—sapped much of its momentum. Paul Ballew, chief economist for Nationwide Insurance, warned that there are plenty of looming threats this year, too: the continuing crisis in Europe, signs of a slowdown in China, partisan gridlock in Washington, and budget cuts in state and local governments.
"The good news is we have some momentum going into the new year," Mr. Ballew said. "The challenging news is we still have some ongoing issues that need to be resolved."
4) Inspirational Quotes@Inspire_Us from Twitter
It is the mark of an educated mind to be able to entertain a thought without accepting it. -Aristotle
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