The stock market is down sharply. Investors are worried about a recession. Bush enters the Oval Office on a damaged note. What a miserable way to end the year, and begin the new one. My own view is that the dark mood of deepening gloom is overdone. The economy is about to pull out of its economic stall. And good investment values are there for genuine long-term investors. But whatever is in store for the economy and markets, the transition from one year to the next is an opportune time to revisit the basics of personal finance. Here are some guiding principles to think about.

Keep your money matters simple. Simplicity is an under appreciated virtue when it comes to finance. The more complicated the products and strategies, the more people waste their time and money.

Create a plan. Few of us like the idea of setting up a plan, since it means constructing a budget. Yet a financial blueprint is critical for transforming your goals into action. You're in control of your finances with a plan.

Manage your debts. For far too many people, personal finance means getting out of credit card debt. Pay off your balance in full at the end of each month.

Invest for the long-haul. Remember, trading is hazardous to your wealth. Ignore the buzz on Wall Street. Instead, put your energy into figuring out how much of your portfolio to invest in stocks and bonds, and keep costs low.

Diversify. The essence of investing is uncertainty, and >diversification creates an invaluable margin of safety for tumultuous times. Pursue financial literacy. You don't need to become a finance economist or a calculus wizard. But learning the financial basics is key when it comes to managing money well over a lifetime.

Have fun. Don't forget why you embarked on this personal finance journey in the first place. Saving to save is just as bad as spending to spend.

 


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