When prioritizing your debt repayment, start with the highest-rate card first and focus on paying off the balances in descending order. Use Bankrate.com's debt pay-down calculator to develop a customized, month-by-month plan for repaying your debt.
Start or hike contributions to a retirement plan
The burden of supporting ourselves in retirement is increasingly on our shoulders. The first introduction to retirement savings often comes through a workplace retirement plan such as a 401(k).
Contributions not only reduce your taxable income now, but your investment goes to work immediately and grows without the headwind of taxes until you begin withdrawals in retirement. The regular contributions made with each paycheck represent the best example of dollar-cost averaging, or buying fewer shares when values are high but more shares when prices fall. Any employer contribution represents free money, so be sure to contribute at least enough to maximize any employer match.
If your employer offers a Roth 401(k), your contributions are made with after-tax dollars, but withdrawals in retirement will not be dinged by taxes, allowing you to keep your entire nest egg. For more information, see the retirement channel at Bankrate.com.
Make an IRA contribution
If you or your spouse has earned income, then you are eligible to contribute to an individual retirement account, or IRA. In 2012, those younger than age 50 can contribute a maximum of $5,000, assuming your earned income is at least that much. Those 50 and older can contribute up to $6,000 thanks to the permissible catch-up contributions.
You can open an IRA with a bank, credit union, brokerage firm or mutual fund, and invest the contributions how you choose. An IRA can be a great way to supplement the asset allocation of your workplace retirement plan where you may be limited to an available menu of investments.
With an IRA, you can choose investments that aren't available in your workplace retirement plan, such as commodities, individual stocks or certificates of deposit, or CDs, giving you access to investment options that result in a more diversified portfolio.
A traditional IRA offers tax-deferred savings while a Roth IRA offers tax-free savings for retirement. But Roth IRA contributions are limited based on household income.
Rebalance your investments
Bonds have had an up year, cash yields are still near zero, and there has been plenty of volatility in the stock market. Many international markets are taking it on the chin while the U.S. market has been treading water.
Given this variation in returns, your portfolio may look different than it did at the beginning of the year and may have strayed from your intended investment mix. So rebalancing your investments back in line with your goals and risk tolerance is a prudent step.
Rebalancing also enforces the discipline of buying low and selling high, as you'll be shifting some money out of the assets that have performed well and into those that have lagged on a relative basis. This also helps reduce the susceptibility of your portfolio to a sharp correction in the markets.
Rebalancing is a good habit to undertake each year, but it is particularly important in a year of volatile movements and disparate returns between asset classes.