By David Koch
“The best time to plant a tree was 20 years ago. The second best time is now.”
– Chinese Proverb
Each New Year brings a new opportunity to start again with a clean slate on many fronts. Looking at survey data from a variety of sources, about half of Americans make some sort of New Year’s resolution—and while the majority of these are focused on health-related issues (quitting smoking, eating healthy, exercising more, etc.), not surprisingly, financial resolutions come in at a close second.
You already know that you need to pay down your debt (and not get in over your head in the first place). You already know that you should be saving for your retirement. You already know that you should make a budget and stick to it. You already know that you should invest in yourself, expand your skill-set and maximize your human capital. You already know that you should make sure you have adequate home, auto, and health insurance.
You can read about all these great things and more in a multitude of other places on the Internet—but not here. In this article we’d like to discuss five overlooked financial-related New Year’s resolutions that you can start now, keep doing all year, and feel great about 11 months from now.
There are a finite number of hours in a day, so it is important to know that in order to create a good habit, you need to stop a bad one. Killing a bad habit is far easier than starting a new good one, so start with at least making room for future good habits. Quitting smoking and cutting down on sweets may jump instantly to mind, but this doesn’t need to be that extreme. It might mean not getting your $6 daily latte on Fridays. Or, not watching that ho-hum TV show on Wednesday nights and reading something work-related instead—in order to advance your career.
You know what you need to do [or stop doing!].
There are multitudes of different ways to do this; raising your percentage contribution to your 401k plan is likely the most common example for most Americans. If you’ve got that maxed out, or you’re not a participant in a retirement plan, simply setting up an automatic monthly (or bi-monthly) sweep into a savings or investment account is your next best solution. Don’t let sitting down with your checkbook and an envelope get in the way of saving for the future. You can log into most online bank portals and set up an automatic sweep out of your checking account and into an investment account. It doesn’t matter if it is $50, $500, $5000, or $50,000 per month—in the immortal words of the great Ron Popeil, “Set it, and forget it!”
Have the automated sweep coincide with the timing of when you get paid. If the money doesn’t hit your bank account, it isn’t there to spend.
If you haven’t been the victim of identity theft yet, you likely will be. Using the simple technique that we outline here you can start using a unique password for each online account. No one needs to sit down and spend hours changing all their passwords all in one fell swoop; however, if you make a concerted effort to change them one at a time throughout the year, maybe you’ll be done by 2018.
“Treat your password like your toothbrush. Don’t let anyone use it, and get a new one every six months.” – Clifford Stoll, American astronomer, author, and teacher.
This is a two-fer: You will likely end up eating more salubriously and you will likely save money in the meantime. From a health perspective, most restaurant food has too much salt and too much butter. That’s what makes it taste so good—but between the trip to the restaurant (gas, parking, etc.), the overpriced beverages, and tipping—you’re also paying a hefty premium to have that food served to you. You don’t need to go paleo and meal-prep every meal. That’s not likely to be sustainable. But if you simply prepare one or two meals more often per month you’ll be ahead of the game.
Skipping one $100 meal-out each month and instead investing it (with a 6% return) will net you almost $7,000 after five years. That could fund an amazing two-week romp through Europe.
If you carry a balance, find a card with a 0% introductory rate. Or if you don’t carry a balance (and good for you), take advantage of the one-time boost of bonus points. Those initial bonus points could buy a plane ticket or a hotel stay somewhere nice. Unfortunately, credit card companies treat new customers better than old ones, so if that’s the game they want to play, make sure you are always someone’s new customer. Most credit cards will allow you to take advantage of their introductory deals once every 24 months. If you fly United and American, for example, simply rotate between their cards every two years.
Make sure you close the account you’re no longer going to use.
That’s it. We wanted to keep the list short and doable. If you want help triaging your debt or sticking to a budget, a quick Google search will queue-up tens of thousands of articles on those subjects—or you can also just ask your favorite financial advisor.
RISKS AND DISCLOSURES
The views contained herein are not to be taken as an advice or recommendation to buy or sell any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without previous notice.
All information presented herein is considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted.
This material should not be relied upon by you in evaluating the merits of investing in any securities or products mentioned herein. In addition, the Investor should make an independent assessment of the legal, regulatory, tax, credit, and accounting and determine, together with their own professional advisers if any of the investments mentioned herein are suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment.
It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield may not be a reliable guide to future performance.