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Seven Ways to Improve Your Finances - Keys to maintaining financial fitness

It takes a lot of hard work to get into top physical shape ... and even more work to stay there. Usually, the effort is well worth it. The same thing is true for staying "financially fit," especially in the current economic environment. Although there are no guarantees, the following regimen can serve you well throughout the coming year.
1. Take control of your affairs. Are you the type of person who consistently overextends yourself, just staying ahead of the bill collectors? If so, you need to motivate yourself to change your lifestyle. Otherwise, you could find yourself in a financial hole you simply cannot dig yourself out of.
2. Write down your objectives. It may be helpful to divide them into short- term and long-term goals. Obviously, certain short- term goals will often take top priority (e.g., buying a new car if your old clunker is breaking down). But don't ignore such long-term objectives as saving for your child's college education or a comfortable retirement.
3. Track income and expenses. If you have more money going out than coming in, you have a problem. Try to keep a detailed record of all your income and expenses for a month or two. This financial exercise may show you where you can cut back (e.g., lavish vacations or entertainment expenses) without doing too much damage.
4. Plan ahead for contingencies. You have to make allowances for unexpected expenses such as emergency dental work, a fender bender or a leaky roof. In other words, if you are currently breaking even, you should still reduce your expenses to be on the safe side.
5. Save money to invest. Don't confuse savings with investments. In effect, your savings are the amounts you are setting aside for investment purposes. With savings, you usually know how much you are going to receive in return without risking your principal.
On the other hand, investments generally carry an element of risk. In many cases, your return may fluctuate due to market conditions, economic factors, etc.
6. Diversify your portfolio. It's highly unlikely that you will be able to realize your long-term goals by concentrating on one single type of investment. In fact, there is a greater chance you will get burned. By spreading your investments among several different categories, you may be able to minimize your overall risk.
7. Monitor your investments. Just because an investment plan seems to be working in the short term does not mean it will work forever. You need to make sure that your investments continue to perform up to your expectations. If they don't, it may call for a change in strategy. Finally, you should reassess your goals and needs periodically.
These are just a few basic ideas for improving your overall financial picture. Use them to build a strong financial foundation for the future.

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