TERRY'S TIPS FOR 2009

THE SAVAGE TRUTH | It's an ideal time to take a new approach to your personal finances

It's a new year and a new beginning. So you're entitled to take a new approach to your investments and personal finances. Here are my 2009 Terry's Tips to start the year out right.

Change is certain -- Just when you thought you had the markets figured out, things changed. A year ago, you knew it was smart to buy the dips because the market always rebounded higher.

Today, you think you know it's smart to sell the rallies because stocks are sure to fall. Just remember, the market always fools the greatest number of people.

Don't get dragged into TV pundits' calls for tops and bottoms, buys and sells. Stick with your own appropriate asset allocation plan -- and keep contributing to your retirement fund.

Don't confuse stocks with the economy -- It's entirely possible to have a significant stock market rally while the economy is in the tank. Yes, the markets "represent" the outlook for business, but they are not tied to economic activity. Sometimes the markets look ahead -- across a gulf of recession into which your personal situation may fall. And sometimes the markets are influenced by more than economic fundamentals.

If a lot of liquidity moves into the market, stocks can move higher in spite of bad business conditions.

Watch the Big Picture -- The headlines may scream recession, or edge close to an even worse outlook for falling economic activity. Daily headlines can act like a sort of water torture, forcing you to join in the prevailing sentiments.

But if you keep your eye on the big picture, you'll find better investment opportunities. For example, all the Fed's liquidity creation could lead to inflation down the road, in spite of today's deflationary news. Learn to hedge your bets by keeping cash for flexibility, and a few inflation hedges like gold, just in case.

Beware of bonds -- When interest rates rise, bond prices fall. Those who locked in 7 percent yields on government bonds in the last decade are sitting pretty. Those $1,000 bonds are worth 2.5 percent.

Conversely, if you lock in today's low yields on long-term bonds, you could lose a fortune even on the highest-rated bonds or bond funds. If inflation does return, pushing interest rates higher, your 2.5 percent coupon will look pretty skimpy.

Know where you stand -- This is the perfect week to figure out what you own, and what you owe. Use a computer program like Quicken or Microsoft Money -- or simply take a sheet of paper and draw a line down the middle.

If you have credit card debt, list the outstanding balances, interest rates and minimum monthly payments. If you have investments, figure out exactly how much you lost last year -- and what that does to your retirement plans.

Face the future -- If you do one financial calculation this week, it should be a visit to www.ChoosetoSave.org, the Web site of the Employee Benefit Research Institute. Once there, click on "Ballpark Estimate," and you can instantly see how much more you need to save to reach your retirement goals -- or how much your lifestyle will be cut in retirement if you don't make some changes now.

Don't take anything for granted -- As some investors have sadly learned, the obvious is not always the sure thing.

What do you think is your safest investment?

If it's your pension, think again -- especially if you are a state or municipal employee.

The federal government can create money to pay its bills, while cities and states have to face the reality that they may not be able to keep all their promises -- from snow removal to retiree health care to pension benefits.

Count your blessings -- Just when you're getting depressed about how much money you lost in your retirement plan, or the lack of good prospects in your job, take a look at all the positive things in your life -- ranging from your family, to your health, to your talents, to your innate optimism.

If you can't find anything to appreciate, try volunteering at a homeless shelter for a while. And if you're reading this newspaper in a homeless shelter -- a real possibility these days -- remember there are people who are willing and trying to help.

Don't judge yourself by financial measures -- Almost everyone lost money last year. Those who didn't were either extraordinarily smart (I know a few), or liars (I think I know more), or scam artists (I missed those). Losing money doesn't make you a loser.

This is a new year and a chance to start over. So don't kick yourself for past mistakes. And don't think it's too late to reach your goals.

Start counting forward now instead of looking back. You won't have a chance to make those same mistakes again because it's always different the next time.

That's what makes life interesting. And that's The Savage Truth.