Pay off your credit cards, take advantage of 401(k)s, open an IRA

By now, as I wrote among my predictions for 2007, I expect that millions of Americans have already broken their New Year's resolutions, including the ever-popular but vague "save more money" and "get my finances in order."

So start afresh and make specific resolutions. Some ideas:

Get your most recent checking account statement and see how much you forked over to your bank on monthly service charges, ATM fees, and any other charges, such as for insufficient funds (bouncing checks, that is).

You may discover you are wasting hundreds of dollars a year and could save by shopping for better terms (even at the same bank with another type of account) or by managing your account more carefully. In 61 years, I have yet to pay my first bank fee for any of the items above.

Now check your credit card statements -- most card-carrying Americans have more than one -- and see which one charges the highest interest rate. (The statement may use the term "daily periodic rate" to refer to the interest rate). Check out other fees, such as for late payments or cash advances.

If you carry a balance, list how much you owe and how much interest you are being charged on each card. Then make it a priority to pay off the card that charges the highest interest rate. If you can't pay the bill in full, at least commit to X dollars above the minimum payment each month. When you are done paying off this card, move on to the remaining card or cards with the highest rate.

And when you are done with all, resolve to always pay your credit card bill in full. As with bank fees, I have yet to pay my first cent in interest to a credit card.

Next, look over the most recent statement for your 401(k) or other employer-sponsored retirement plan.

Check how much the statement says you are contributing, how much if anything your employer is contributing, where the money is invested, and whether the account value has gone up or down since the previous statement. If anything does not seem right or is not clear, ask the person in charge of the program to explain it to you.

In particular, make sure you understand the investment options. If you see an option called "lifecycle" or sometimes "lifestyle" fund, it means a widely diversified fund that invests in a variety of asset classes, such as stocks, bonds, and cash, and that typically becomes more conservative as you get older. (Verify whether this last point is true for your fund.)

A lifecycle fund is designed to be a convenient one-stop investment for your retirement plan. It you pick it as investment option, there is no need to put any of your money in any other option, and it may actually be harmful to do so.

Some surveys, however, show many employees do not understand the purpose of a lifecycle fund. They split their contributions among the lifecycle fund and other options, mistakenly thinking they are getting broader diversification.

But depending on what the other options are and how many there are, such a split may lead to portfolios that are not at all diversified and may be far riskier than the employee realizes.

Go back to the first and second resolutions.

With all the money you'll save on fees and interest charges, contribute to an individual retirement account.

An IRA is a tax-favored retirement account you can open at any number of financial institutions, including banks, mutual fund companies, and brokerage houses. The maximum contribution is $4,000 for both the 2006 tax year (you can contribute through April 16, 2007) and 2007 tax year (you can contribute through April 15, 2008). People 50 and up can make an additional $1,000 "catch-up" contribution each year, for $5,000 total.

Based on my reader mail, many people think they can't open an IRA because they don't have $4,000. But that's the maximum contribution. There is no legal minimum under IRA rules, although each financial institution can set its own. As a practical matter, a few hundred dollars is all it takes at many institutions to open an IRA. Once you open one, you'll get the most benefit if you contribute regularly.

Humberto Cruz is a columnist for the South Florida Sun-Sentinel. He can be reached at askhumberto@aol.com.