Here we are again: That time of year we ramp up to make some real changes in our life. Fresh start, new year-new you, lose weight, quit smoking, get organized, eat healthier, get out of debt, save more money, stop singing ‘I Feel Pretty’ in your underwear on top of your mailbox every morning…we’ve heard it all before.
Each new year brings new goals, and financial resolutions are at the top of the list for just about anyone over the age of 30.
However, when it comes to making those financial resolutions, my first piece of advice is don’t bother. You have probably heard the statistic that the success rate of all New Year’s resolutions is 8% (and that includes things like, “get out of my PJs twice a week.”) Even so, we are inundated with cutesy little tips and tricks to try to improve your finances this year:
‘Save your change in a jar’ – First off, how often do you really use cash for anything anymore? Congrats, you saved enough in 20 years to buy a 2-ply case of toilet paper (the good stuff) at Costco!
‘Read one financial book this year’ – Good luck finding one that has any content that makes it any more useful than that case of 2-ply you just purchased.
‘Pack your lunch once a week’ – Skip this one and see “Top 10 Weight Loss Strategies for the New Year.”
‘Limit yourself to one latte a week’ – Obviously, the author of this one doesn’t live in the Pacific Northwest (get a clue and keep it reasonable).
‘Quit the Gym and workout at home’ – Great, now you have a $600 treadmill/clothes rack in your bedroom and a stack of Richard Simmons DVDs that your grandkids will enjoy for years to come.
There are so many more that I would love to butcher, but I think you get the idea. So, what DOES work? It is far simpler to make a change and just deal with it than it is to revisit this battle every month. Put something in place and move on. You will adapt and survive.
- Keep track of your spending – There are apps for everything these days and a whole slew of websites that can make this process very simple. Many banks have this tool, or you can use Mint.com, Quicken, or if you are a Financial Plan client, simply use your dashboard that is already in place. This process is very similar to logging everything you eat; it just makes you think before you pull out your credit card.
- Avoid the temptation to starve and binge – Paying off your $350,000 mortgage in 14 months will not happen regardless of what that Facebook ad tells you about the ‘New Government Program.’ Systemizing the saving process is the key: set it and forget it.
- Set your Retirement plan savings percentage higher than it is now and increase it every year. You’ll never miss it.
- Establish a systematic savings straight from your checking account. Set it a little higher than what you are comfortable with and then deal with it.
- If you didn’t request it, run away– We all get inundated with debt payoff schemes almost daily. I will pledge my Rhinestone Studded Spandex gym outfit on the fact that they are all garbage. If you need a place to refinance your mortgage, go seek one out and ignore those that come to you.
- Turn off the noise and logout –Give up financial entertainment and logging in to check your account. While it may be entertaining, it is brutal for your financial wellbeing. I have heard the ‘financial media’ very accurately referred to as “Investment Porn.”
- Balanced, helpful and truly intelligent financial advice does not sell advertising. “Get in, get out, go to cash, buy Bitcoin!” Reduce your stress and go to Vegas. You have a far better chance of winning and the drinks are free.
- Stop checking your accounts every day. I can cite study after study, that shows that the people who check their accounts less frequently fare way better in the long run.
- Create a degree of separation – Instead of systematically saving your funds into another bank savings/checking account that is accessible via ATM (in the middle of the night with no one watching) save it into an investment account that will force you to call or email someone to get ‘permission’ to have funds sent to you. Whether you invest conservatively or aggressively, this gatekeeper approach will once again cause you to pause and think before you spend.
- Resist the urge to spread the wealth when it comes to debt – Don’t pay a little extra on all of your debt payments. Rather, focus any extra payments on one debt and get it done first, then snowball that whole payment to the next debt, etc. https://en.wikipedia.org/wiki/Debt-snowball_method
- Test your generosity – This is more ideological than numerical, but it doesn’t make it any less real. You will find that you won’t be able to out-give your needs. The whole process of giving to something/someone less fortunate than you brings a freedom and perspective change that makes all of these other things much easier.
So, the next time you sneak out of bed and grab the ½ gallon of ice cream you stashed in the back of the freezer under the bag of frozen spinach, hang your robe on the treadmill you never use, turn on Netflix to binge-watch ‘the Bachelor’ and grab your iPad to buy 27 things on Amazon you don’t need after digging through the dumpster to find that pack of smokes, at least you can feel like you have your finances under control.