11 Ways to Save Money Now

Don't let this recession keep you down. Grab the opportunity to build a stronger portfolio, cut the fat from your budget, and give yourself a head-to-toe fiscal makeover.

1. Get your portfolio off the couch...

..and bring balance to your stocks and bonds.

If you're like most 401(k) investors, you didn't touch your investments last year, in the darkest hours of the bear market. That was hardly a sign of buy-and-hold discipline. The majority of 401(k) participants haven't done anything with their accounts in years.

Say you entered last year with a 60%-stock/40%-bond mix. If you didn't rebalance, that's now a fifty-fifty split. Since 1926, the annual return for a 60-40 mix has been 8.5%, vs. 8.1% for the even split. Over 10 years that can mean an extra $41,000 in a portfolio worth $500,000 today.

On the plus side, the bear market has already "rebalanced" the portfolios of those who took on too much risk. In 2007 a third of workers in their fifties - for whom a 60/40 portfolio is typically a sensible proposition - held more than 80% of their 401(k)s in stocks; that's down now.

But rebalancing isn't a one-time event. Check your portfolio at least once a year, and reset it to your long-term targets if your allocation shifts by more than five percentage points. Don't have that kind of discipline? See if your 401(k) offers an auto-rebalancing option (half of large-company plans do). Unsure what the right mix is for you? Go to cnnmoney.com/allocator.

2. Go on a Treasury diet...

...and bulk up on other types of bonds.

As investors have been slowly shifting out of low-yielding Treasury bonds - the shelter of choice in last year's market storm - into higher-returning assets, Treasury prices have fallen this year. The result: Long-term government bond mutual funds are down 12.6% on average*, making them one of the poorest- performing fund categories year to date.

Worse, losses could continue if there are signs of an economic recovery or inflation ahead. So rebalance your fixed-income portfolio by shifting some money out of debt issued by Uncle Sam and putting it into other bonds. Both high-grade corporate bonds and high-quality municipals are offering much higher yields than Treasuries (corporates are yielding around twice as much).

In this environment, "no more than 20% of your bond portfolio should be in Treasuries," says New York financial planner Karen Altfest. An easy way to gain exposure to munis and corporate bonds is through a professionally managed fixed-income fund, such as those found in the Money 70, our recommended list of funds.

3. Accept the new norm...

...and set realistic investment goals.

You got used to double-digit returns when times were good, which makes the pain caused by what's happening now feel downright excruciating. If you had simply set realistic expectations - no, it's not normal for stocks to rise 20% in a year - you wouldn't feel so bad.

But our brains don't work that way. And prior to the downturn, our most recent experience was one of the most extraordinary eras in history, marked by quarter-century bull markets for stocks and bonds, and a huge run-up in home prices earlier this decade.

Now that you're faced with a true financial crisis, you need a coping mechanism. Try this on for size: On a piece of paper write out a series of "what ifs." What if your portfolio doesn't recoup its losses for another seven years? What if it takes another decade before your home value recovers?

Then jot down ways you'd adjust to these possibilities. Perhaps you agree to postpone retirement by a few years. Maybe you stay in your home longer than you planned.

By documenting how you'll react to these scenarios, you're creating lower expectations. And that will leave you plenty of possibilities for happy surprises.

4. Lose rate by refinancing your mortgage

Rates on standard 30-year fixed loans are at or just below 5%, about the lowest they've been in decades. So if you're paying more than 6% on your loan - or have an adjustable-rate mortgage - and plan to stay in your home for at least a few more years, look into refinancing.

There are restrictions. Your new loan can't be greater than $417,000. In pricey markets like New York City, that figure goes up to $729,750. Rates on larger jumbo mortgages are a stiffer 6.4%.

Also, lenders are shifting back toward old standards. Your monthly mortgage, insurance, and taxes shouldn't eat up more than 31% of your monthly income, nor should your total monthly debt payments exceed 43%.

Before you forge ahead, make sure refinancing is worth it. Use the refinance calculator to run through your figures.

5. Juice your credit score an extra 20 points

Now that lenders are demanding to see what shape your credit is really in, the standards for good scores have changed.

While a FICO of around 720 used to give you a shot at the lowest mortgage rates, today you'll need a 740 or higher to qualify for the best terms.

How can you bridge the gap? First, make sure mistakes on your credit reports aren't dragging you down. Go to annualcreditreport.com and get a free report from the major credit bureaus: Equifax, Experian, and TransUnion.

Next, goose your score by lowering your debt-to-credit ratio. If you owe $2,000 but can borrow as much as $15,000, your ratio would be about 13%. Pay off enough debt to "get your overall utilization down below 10%, and you will see your score improve," says score expert Gerri Detweiler of Credit.com.

Another trick: Avoid using your cards in the month or so before applying for a loan. Even if you pay off your balances at the end of the month, there's a chance a lender might "pull" your score the day before those payments are recorded, making it look as though you're tapping your credit.

And ask issuers to raise the limits on your existing accounts. "For all the news that card issuers are cutting credit, they are also selectively offering more credit to their best clients," says Craig Watts of FICO.

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