If your goal is to get your finances and real estate ready in 2010, you could be in for a wild ride, depending on how the recession affected your finances.

If you currently have a mortgage, but are underwater with your loan because your house is worth less than the amount you owe, you may need to boost your savings in order to qualify for a loan modification or a refinance.

In last week’s column, I suggested putting yourself on a budget, trading down each of your expenses to a less expensive alternative, paying off your charge cards, and paying yourself first and last as a way of building up your cash reserves for a down payment and closing costs.

But there are other ways to reorganize your personal finances, especially if you’ve experienced a foreclosure, short sale or bankruptcy first-hand.

Focusing on building up your credit history and raising your credit score is paramount. But you’ll also need to set aside cash to cover the required down payment (which will increase next year, for the second year in a row, on FHA loans), build up cash reserves, and pay for some closing costs and moving expenses. You can expect mortgage insurance premiums to rise as well.

It’s going to take some work, but you can improve your personal finances. Here’s the second half of my annual list of Personal Finance Resolutions you ought to make for 2010:

  • Pay all of your bills on time. Whether you’re renting an apartment or your own your home, you’ll want to make sure that you’re paying all of your bills on time. This is especially important if you’re trying to re-establish your credit history after a financial crisis.

While the credit rebuilding process can take years, paying bills on time helps to show a pattern of progress. Late payments show that you’re not managing money well, and even a single late payment can drop your credit score by 50 to 100 points.

If you filed for bankruptcy, went into foreclosure, or did a short sale on your home, your credit score might have taken a 150-point hit. Paying your bills on time is the best way to start fixing the damage.

  • Save your change. Every day when you get home, empty your pockets (or wallet) of change into a glass jar. After two weeks, drop the change and your lowest denomination bill into the jar. At the end of a month or two, take it to the bank. You’ll be shocked by how much you’ll save and how you’ll never miss it in your daily routine.
  • Contribute the maximum to your retirement plan. Last December, I wrote that the financial markets were down 45 percent from their high of October 2007. On March 9, 2009, the markets took a deep dive but have since made a remarkable recovery. As of mid-December, the stock market had risen nearly 70 percent off its lows. Those investors who were tough enough to stay invested have seem some of their 401(k) and other retirement assets come back.

The market may bounce around (in fact, I expect it will), which will leave stomachs churning. Still, take advantage of these tax-deductible, tax-deferred investing opportunities. If your employer doesn’t offer a 401(k) plan, and you qualify for a Roth IRA, you should open it up and start putting away money for your retirement. If your employer offers a Roth 401(k), you should invest as much as you can there as well.

  • Think about the tax consequences before you make a decision. If you sold your personal residence in a short sale, there are IRS rules in place that essentially say you won’t be taxed on the difference between the amount the home sold for and the amount you owed.

But, if you sold an investment property in a short sale, you may have to pay taxes on that “phantom income.” The same thing is true if you got your credit card company to take less than you owed on your credit cards.

Bottom line: Before you agree to pay off a debt for less than you owe, think about the tax consequences.

  • Resist the temptation to use your 401(k) or IRA as a piggy bank. The cash you’ve saved in your 401(k) or IRA should only be touched as a last resort – but that’s a place plenty of Americans got to this year.

The government allows you to withdraw up to $10,000 from an IRA account for the purchase of a first home (you’ll pay taxes owed but no penalties on the withdrawal). But if you withdraw cash for any other reason, you’ll pay taxes on the at your marginal tax rate (and the withdrawal may push you into a higher tax bracket). If you withdraw from your 401(k) or IRA and you’re under 59 ½, you’ll pay a 10 percent penalty on the money.

Whether or not you can borrow any amount from your 401(k) or other retirement plan at work depends on the plan rules (check with your plan administrator).

Either way, carefully think it through before you take the cash from these accounts. If the $10,000 is your entire retirement kitty, you may be jeopardizing a secure retirement. If the $10,000 represents only a fraction of your retirement savings, you may have more flexibility.

  • Consider refinancing or a loan modification when interest rates drop or when your credit improves. We started 2009 with mortgage interest rates a little over 5 percent. We ended the year with 30-year rates under 5 percent. Twice during the year, mortgage interest rates touched a 50-year low.

What’s going on? The Federal government is spending big bucks to essentially buy down the interest rates. How much? By the time the program is over around $1.25 trillion (with a “t”) will have been spent on mortgage-backed securities, lowering interest rates.

But the party might be almost over. The government says the program will end in the first quarter of 2010, and after that, interest rates will likely rise to somewhere between 6 and 7 percent. Fannie Mae has just instituted tougher underwriting guidelines that will prohibit buyers with a high amount of debt from getting a loan. If you’re going to refinance, sooner is much cheaper than later.

Don’t expect your savings to grow overnight, but if you start to implement a few of these strategies, by this time next year, you’ll notice a significant improvement in your financial net worth.

Check out the eBook, How to Save (or more) Every Month