A Busy Year For Fiscal Fitness

Can it be another year is nearly over?

Typically in the last weeks of December, I like to reflect on my personal financial life. I take stock (sorry, just like that pun) of whether I followed all the advice I got during the year from my financial adviser. (I did.) Okay, I did 75 percent of what she told me to do.

Year-end is also a time to catch up on what's happened in the broader realm of personal finance. Here's a rundown of some noteworthy money matters from 2005:

New bankruptcy rules. It's now harder to declare yourself broke. Under the law that went into effect this year, debtors have to meet a means test to be eligible for Chapter 7. Under the old bankruptcy rules, most people decided for themselves which type of bankruptcy they wanted to file. And most chose Chapter 7, where you can generally wipe out all your unsecured debt. Now more people may have to file a Chapter 13 bankruptcy, in which you have to pay back some of your debts.

Credit reports became free to everybody. It used to be that only residents in seven states could get their credit reports for free. Everyone is now entitled to get free credit reports once every 12 months from the three nationwide credit bureaus -- TransUnion, Experian and Equifax. To order your free credit reports so you can look out for fraudulent accounts or charges, go to http://www.annualcreditreport.com/ or call 1-877-322-8228.

Please be aware there are impostor Web sites out there. Only the online site I just cited is authorized by the federal government to provide the free annual credit report you are entitled to under the new law.

Minimum credit card payments increased across the board. Federal regulators ordered credit card issuers to increase the minimum monthly payments consumers have to make. The regulators want the banks and other financial institutions to require that cardholders cover at least 1 percent of their outstanding balance each month. This is in addition to any finance charges or fees owed.

Why the change? See next year-end development.

Savings rate falls below zero . In October, the U.S. Department of Commerce reported a national personal-savings rate of negative 0.7 percent. That means people are spending more than they make by using credit cards, borrowing against the equity in their homes, tapping their savings or selling assets, such as stocks. "Americans are not saving as much as they used to, and this spells potential disaster [in] the future," said Phillip Fournier, vice president of Legacy Advisors, an investment management and financial planning firm in McLean.

I once had a reader ask me if it were okay to take out a home equity line of credit instead of creating an emergency savings fund. His theory was, if he got into financial trouble, he could just draw down on the line of credit.

He could do that.

But the point of having a savings cushion is so it can carry you through a financial disaster or hardship using your own money -- not borrowed funds. That line of credit the reader wanted to establish should be his second line of defense, not his first. As a goal, save enough to cover at least three months of living expenses. Six months is even better.