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Nine Smart Personal Finance Moves in 2009

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This is my ninth year of writing a New Year's column that suggests steps readers can take to improve their finances in the coming year. The theme this year is "keeping you in the know." Here's hoping you have a safe and prosperous new year and that you'll stay in the know.

1. Know yourself. The financial planning field has largely embraced helping people identify their life goals and mapping out a path to achieving those goals. It makes sense. Money can be the means to an end or a way to keep score. But it makes a lousy proxy for measuring what you get out of living your life.

What do you want to accomplish while on this earth? What do you need to get it done? Revise, re-evaluate and resubmit as necessary, but don't let the pursuit of wealth be the goal. Instead, let it be a catalyst to achieving your goals.

The Bankrate story "Use investments to reach your goals," part of the Financial Literacy series, can help you get started.

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More Money Strategies for 2009:

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2. Know where the money goes. You can do one of two things with income: Spend it now or save it for later. Consistently spending more than you make keeps you from putting anything toward future goals. Put together a spending plan for your income and try to stick to that plan. Paying off credit cards and staying current on bills is a good first step.

I call it a spending plan rather than a budget because budgeting -- like dieting -- is a chore. On the other hand, a spending plan puts a positive spin on how you choose to allocate your income. Bankrate's home budget calculator will help you structure a spending plan.

3. Know when to say no. Growing up, my mother always had me make the distinction between a need and a want. It's stuck with me over the years. Being able to focus on what you need versus what you want can make the difference in reining in spending.

While I've never been a member of the lose-the-latte school of financial planning, paying 18 percent on a credit card balance to finance that latte habit means you can't afford it. Personally, I go for a Rainforest Espresso made in my trusty Keurig machine. It costs about 50 cents a cup.

Once you know where the money goes, do a little triage and work on reducing your monthly nut. Cutting back on cable, losing the land line, dining out less and packing lunch can help free up funds in your monthly spending plan.

4. Know when to say yes. Being able to differentiate between a need and a want doesn't mean you should ignore the wants. Instead, just hold them in abeyance until you get the needs met.

A little spontaneous consumption is good for the soul. There's more to life than bills and work. Put together a list of things you've always wanted to do. Then do one or two of the legal ones and see how you feel.

Know when to ask for help...Read more