12 Financial Tips for 2012

Financial fitness Before you cook the turkey or wrap the presents, think about your financial fitness in the new year.

Prepared or not, the market follows its own rules and logic. Here are 12 investing, banking, mortgage and credit card tips that offer some insight on what to do now to start 2012 off on the right foot.

Trust history, this time is not different Every period of economic expansion and contraction has a different story, but people react to them in similar fashion: mostly irrational with a touch of shortsightedness.

Whether it's a bull market or a bear market, it will eventually end.

"Trust the concept of a regression to the mean," says Robert Fragrasso, CFP, chairman and chief executive officer of Fragasso Financial Advisors in Pittsburgh. "An investor should maintain discipline -- total asset allocation discipline -- and continue to invest discretionary money into their portfolios."

In other words, keep funneling money into an individual retirement account, or IRA, or 401(k) or taxable investment account, and stick to your investment plan regardless of what the market is doing.

"Trust the fact that this time is not different; it just comes packaged differently. And take advantage of it. People say, 'Boy, I wish I had $1 million to invest back then when it was low.' Well, you had what you had; did you invest it?" Fragasso says.

-- Sheyna Steiner

Bargain with your banker Many bank customers feel so strongly about the value of free checking they're willing to walk if their bank introduces new checking fees. In fact, a Bankrate survey conducted as part of the Financial Security Index in March revealed 64 percent of bank customers would switch banks to avoid fees.

But before you walk out the door and spend the time and effort it takes to move your account to a new bank, it might be worth taking a minute to talk to your banker about how you can avoid checking account fees, says Ray Soifer, a banking industry analyst and consultant based in Green Valley, Ariz.

"Many banks will be willing to give free checking if you maintain other accounts with them and/or if you use direct deposit checks or pension checks," says Soifer.

Switching to a checking account with fewer features may also be a way to save on fees at your existing financial institution.

"Particularly in this pricing environment, make sure you really need the services you're paying the fee for," says Soifer.

-- Claes Bell

Buying a home? Be on top of your game Numerous home purchases fail at the last minute because of mortgage-related delays. This is especially true for deals involving foreclosures and short sales.

A delay in closing your mortgage could not only kill your deal but also cost you your security deposit. That's why it's important to submit the documents requested by your lender as soon as humanly possible and frequently check with your lender to see how the process is going to avoid last-minute surprises.

Keep copies of the documents submitted to the lender, and have those ready to go in case any of the paperwork gets lost in the process, says Michael Becker, a mortgage banker with WCS Funding Group in Lutherville, Md.

"It's a good idea to scan your info and save it on a flash drive in case they ask for it again," he says.

-- Polyana Da Costa

Don't put your credit card on ice If you have frozen your credit card in a block of ice to control your spending, you might want to pull out a hair dryer. Your lender will tag a credit card as inactive or close the account altogether if it remains dormant for too long, says Rod Griffin, director of public education at Experian. While that means you won't be a spendthrift, it also won't help boost your credit score. It may even hurt it.

Inactive credit cards don't contribute recent payment activity, which makes up the largest part of most credit scores.

"If you have an account, you need to use it to demonstrate that you can use the account well," says Griffin.

And if the account is closed, you won't get the benefit from the age of the credit card, which is another component that lifts credit scores, says Sarah Davies, senior vice president of analytics, product management and research at VantageScore Solutions.

Instead of hiding the credit card in a drawer, try practicing a little discipline. Use the card for one purpose only every month, such as gas, groceries or other necessities, and set up automatic payments to pay off the balance in full from your checking account. That way, you get points from the age of the card and your good payment history, and you also learn financial restraint.

--Janna Herron

Think dividends The stock market is, by nature, somewhat capricious. But if a portion of your portfolio contains dividend-paying investments, you can expect that at least a portion of your returns will be more predictable than the day-to-day value of your stocks.

"Capital growth is not where it's going to be. We're only expecting 2 percent (gross domestic product) growth this year, and I don't see that changing over the next few years. Dividend income is where you have to focus," says Julie Murphy Casserly, CFP, founder and president of JMC Wealth Management in Chicago.

Dividend income is not insignificant. According to Standard & Poor's, dividends made up 42.54 percent of the annualized total return of the S&P 500 index from January 1926 through September 2011.

Standard & Poor's tracks companies on their S&P 500 that have increased dividends every year for 25 years. Known as the S&P 500 Dividend Aristocrats index, it's comprised of large-cap, blue-chip companies. The value of the stocks may fluctuate, but the dividend yields will likely continue.

"Global concerns and political nonsense aren't going away anytime soon, so grab as much yield as you can," says Robert Laura, president of Synergos Financial Group in Howell, Mich.

"Investors should buy companies that they like, use often and would recommend to others -- that pay a dividend above 2 percent since this is what the 10-year Treasury is basically paying," he says.

The dividend yield of the S&P 500 Dividend Aristocrats index is 2.82 percent.

-- Sheyna Steiner

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