Overview: A new year, a new you? Before you join that pricey gym to get healthy in the new year, consider taking stock of your financial health first. Follow these simple steps to financial fitness and your New Year’s priorities might just become a walk in the park.

1. Schedule Your Annual Portfolio Checkup

Even the best planned portfolio needs periodic evaluation to make sure it continues to reflect your strategy for achieving your long-term financial goals. Make sure that you and your advisor have clearly defined your tolerance for risk, and that your portfolio is designed to capture market returns within those parameters in a low-cost manner. Look for:

• An asset allocation that no longer matches your risk profile and needs rebalancing.
• Overexposure to one asset class or another.
• Life changes — such as marriage, divorce, or illness — that could require adjust- ments to your portfolio.

 

2. Track Your Spending

Before you set your financial goals, evaluate your current situation by tracking your spending. You might be surprised to see where your money is going. Commit to tracking expenses for at least one month to get a snapshot of your spending habits. Take advantage of free online budgeting Web sites (check out www.mint.com or www.budgetracker.com), create your own spreadsheet or jot down expenditures in a notebook. Armed with a realistic picture of your spending habits, you’ll be better positioned to make the changes necessary to achieve your financial goals.

3. Think Like a Boy Scout: Be Prepared

The economic rollercoaster of the last few years has been a painful reminder that it’s impossible to predict what’s around the corner. Sound financial health depends on being prepared.

Start 2011 with a specific plan to pay down debt or save money. A defined goal to “eliminate $10,000 in credit-card debt” is more apt to provide tangible results than a vague goal to “cut debt.”

If you have an adjustable-rate mortgage, refinancing to a fixed-rate mortgage makes sense in many cases.

If you are a wage earner, save or invest the 2 percent Social Security tax break that you are getting in 2011.

If you haven’t already, create a fund to cover three to six months of living expenses in the event of a job loss or illness.