All the right moves : Profit in 2008

The 22 best ways to keep safe, spend smart and make your money grow in the year ahead

Tumbling home values. Soaring energy prices. A topsy-turvy stock market and a gazillion other financial worries, not the least of which is whether we'll spend the coming year mired in recession.

Considering all the black clouds hanging over the economy, you probably think there's no way you can really expect to prosper in 2008. It will be all you can do just to hang in there.

If that is what you're thinking, we're happy to tell you that you're wrong. There will be plenty of opportunities to make money next year - yes, even in real estate - as well as ways to insulate your finances from the most serious economic challenges ahead.

Your home
The real estate slump isn't going away soon, so whether you're buying, selling or staying put, deal with it.

Make your house look like a bargain
For sellers: Forget what the ugly house next door sold for last year or even what comparable homes are listed for today. Instead, use the going price of houses that have recently sold as a guide - then price your home even lower so it looks like a great deal. (Ask your real estate agent for help with this assessment or go to homegain.com or zillow.com for guidance.)

Best case: Your aggressive pricing attracts more than one bid, pitting buyers against one another and ultimately lifting the final sale price.

Pay a little to look good
For sellers: You'll pay around $150 a month for a 10-foot-by-15-foot storage unit, a piddling amount compared with the $5,000 more your house might fetch or the three months faster it might sell.

The quickest, most effective way to increase curb appeal: Apply a fresh coat of paint, says Dave Liniger, co-founder of Re/Max International, the real estate franchise.

Offer the right incentive
For sellers: Covering closing costs is a biggie because it may help a buyer who's short on cash pay for a home he otherwise couldn't afford.

Or you might offer to kick in homeowners association dues or provide a home warranty covering repairs for the first year.

Lowball your offer
For buyers: If ever there was a time to drive a hard bargain, this is it. Don't be distracted by small stuff like whether the current owners will leave behind their appliances and window treatments.

Focus instead on what's really important: getting the lowest price. Do a little homework and find out what comparable houses have sold for lately. Then start the bidding at 10% to 15% below that recent sale price.

Note: This strategy works best if there are several homes on the market in your area around the same price.

Look like a good risk
For buyers: You'll have an easier time getting approval from a lender if you have enough money set aside to put down at least 10% to 15% of a home's purchase price (no- or low-money-down deals have largely disappeared).

You'll also need plenty of documentation to prove you can afford a home in the range you're looking at.

What lenders will want to see: Your total debt payments shouldn't eat up more than 36% of your income, says Keith Gumbinger of HSH Associates.

Don't jump at a jumbo
For buyers: These days $417,000 is a magic number: If your mortgage exceeds that amount, it's considered a jumbo, and your interest rate will be about six-tenths of a percentage point higher than you'd pay on a standard 30-year fixed-rate loan vs. just two-tenths of a point normally.

The gap expanded last summer when the credit crunch hit, and it's likely to remain unusually wide next year.

To avoid paying the extra interest, try to come up with a big enough down payment to bring your mortgage below $417,000. Or simply hold out for a less expensive house.

Getting a $400,000, 30-year fixed-rate loan instead of a $425,000 jumbo will save you about $325 a month and more than $92,000 in interest over the life of the loan.

Put down your ARM
For owners: If you have an adjustable-rate mortgage that's due to reset next year, consider refinancing into a fixed-rate mortgage now to avoid future payment shock.

Similarly, if you have borrowed heavily against the equity in your home and are feeling squeezed, refinance your home-equity loan and mortgage into one new fixed-rate loan.

A $200,000 mortgage at 6.5%, plus a $100,000 home-equity loan at 8.2%, works out to monthly costs of about $2,500. Roll that entire $300,000 into a 30-year fixed-rate loan at today's rates and your payment will be $1,900 or so, a savings of about $600 a month.
- Money Magazine, November 6 2007