Volatile financial markets. Housing prices on the decline. Unemployment rising. An uncertain -- at best! -- outlook for the economy. It's no wonder many Americans are feeling less well off and less optimistic about their financial futures. But despite all the bad news, I always think of the new year as a time for positive change. As individuals, we certainly can't move markets or predict the future of the economy. But we can take a serious look at our finances, in particular our patterns of spending and saving. It's quite simple, really: When you spend less, you save more: It's certainly the best way I know to get your financial house in shape.

At the heart of financial well-being is a simple, profound kernel of personal financial wisdom: Live within your means. And the easiest way to accomplish this goal is to make a budget and stick to it.

Your budgeting process doesn't need to be elaborate. Most people know exactly how much money they make (some self-employed people and small business owners, of course, have to estimate their income). That's your top line. Now figure out your fixed expenses, such as your mortgage payment or rent, insurance premiums and car payments. Other expenses are variable, like utilities, groceries, clothing and entertainment, though most of these are easily estimated. Your past bank statements can help you understand where your money goes, or you can use personal finance software. Once you have a handle on where it goes, you'll start to understand where you can cut back.

A critical component of living within your means is to avoid nondeductible, high-interest debt, in particular, credit card debt. I'm not saying don't use credit cards at all; they can be a useful financial tool and can help you track where your money goes. What I am encouraging you to do is to avoid carrying credit card balances. Credit card interest costs are high and nondeductible, which is bad enough; even worse, every dollar you pay in interest is a dollar you're not saving for the future or even spending on something of value now. In fact, if you have a lot of credit card debt, your 2009 financial makeover should start right here: by reducing the amount you pay in interest. That alone will have an immediate and obvious positive impact on your finances.

Once you've got a handle on your spending, add a line to your budget for savings. You may already be saving through a company-sponsored retirement plan (I hope you're doing so!). But I believe that savings should be an explicit component of your every day budget, so much so that it eventually becomes second nature -- it helps to make it automatic, and I would encourage you to set up direct deposit into a high-yield checking or savings account through your employer or bank. (Making saving second nature is why I suggest encouraging kids to save part of their allowance; I think it's a great habit to develop as early as possible.)

Most plans start out with specific goals, and a financial plan is no different. Articulating these goals helps you reach them. You might have spending goals (e.g., cut 10 percent from my grocery budget" or "reduce my credit card balance by 10 percent each month"). If you're already saving money (spending less than you take in), then you can set some savings/investment goals.

One of your first savings goals (after eliminating credit card debt) should be to build an emergency fund, a financial cushion that could be really valuable if you lose your job or are unable to work for an extended time. Generally, three to six months of nondiscretionary living expenses should be sufficient (housed in a separate, interest-bearing account for safety and liquidity). Then you can start to focus on longer-term goals like a down payment on a home, college costs for the kids or additional savings for retirement. The longer your time horizon, the more heavily you can invest in equities.

The more explicit you can make your goals, the better. "I am going to save $50,000 over the next 10 years for the down payment on a house" is much more concrete than "saving to buy a house some day." For college, you know the age of your children, and you can easily estimate the future costs of public and private colleges, and invest accordingly. Retirement, of course, is an enormous challenge, but by talking to a financial advisor or by using an online calculator you can make some smart estimates about what you'll need when you leave the workforce. Then work backward to see what kind of money you'll have to set aside each month in order to get there. With a specific goal, dollar figure and timetable, you'll know each year if you're making progress.

The most important idea here is that without thinking carefully about what you want your money to achieve, it will simply disappear. Some people are great and diligent savers, but clearly many people are not; despite Ben Franklin's dictum about "a penny saved," that thought is not engrained in American culture.

To my mind, there is no question that saving and investing are always important, but I think they are especially vital when times are tough. So as you head into 2009, think carefully about what's most important to you and your loved ones. Then put your money where your heart is. You'll find ways to channel it to where you want it to go: your future.