A new year gives you the chance to start fresh with goals and plans for the coming 12 months. It's a time to take stock of the past year. This is my eighth year writing a column that suggests steps readers can take to improve their finances in the coming year. Here's hoping you have a safe and prosperous 2008.

1. Define or refine your life goals. What do you want out of life? How are you going to achieve it? Money is one of the means to achieving a goal but seldom is the goal itself. Don't get drawn into the vague generalities of a comfortable retirement, an education for your children or traveling the globe. When you know what you're working toward, you'll be more committed to investing for those goals.

Spend some time thinking through what you want to accomplish in your lifetime. The Bankrate Financial Literacy series on financial tuneups article, "Use investments to reach your goals," can help you get started.

The financial planning field is moving, ever so slowly, toward the ideas put forth by George Kinder and Susan Galvan, the founders of the Kinder Institute of Life Planning. Kinder and Galvan focus on helping clients identify and prioritize their goals and dreams before working on a plan to help the clients achieve those goals. I think that's a good thing.

2. Put together a spending plan. I don't like to call it a budget. No one likes to diet and no one likes to budget. A spending plan lets you decide how you are going to allocate your income between current consumption and investing for the future. Often, we have to allocate income toward paying off past consumption, too. But once you get those credit card balances under control, you can focus on moving forward toward the future instead of being mired in past spending.

Even though I don't like to call it a budget, someone at Bankrate does. You can uses Bankrate's "Budgeting 101: Start your own budget" work sheet to build your spending plan.

3. Establish an emergency plan. An emergency fund is a pool of money typically invested in liquid investments, meaning the investments can be converted to cash without penalty or reducing principal.

Financial planners often suggest that you have three to six months worth of living expenses available in the fund. The more risk you face in the workplace concerning the size or continuation of your paycheck, the more savings you should have available. The Bankrate Financial Literacy series on emergency funds is a helpful place to start. Within the series, the article "Creating an emergency fund" can help you size and invest your fund.

Some people dislike keeping so much money in short-term investments for an emergency that may never materialize. Instead of investing in an emergency "fund," these folks may want to consider putting together an emergency "plan" so that they know exactly where they can get money quickly.

For some, that means opening a home equity line of credit, or HELOC, to have a ready source of funds to borrow. For others, it may mean a willingness to take a risk liquidating longer-term investments if the need arises. Whatever option you choose, make sure there is a financial backstop available to get you through a crisis.

Cash advances from your credit card or loans from your 401(k) plan are typically not viable financial backstops. Credit card companies can raise the interest rates on those loans to obscene percentages at a moment's notice, while borrowing from a 401(k) can be dangerous if you are laid off from your job -- a 401(k) loan comes due when you leave an employer.

Next: 4. Manage your credit >

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