12/27/2012 6:45 PM ET|
Make your money resolutions stick
No. 5: Set intermediate goals. People get a jolt of confidence when they make progress, says Blair. Rather than striving for one massive end-of-the-year goal, break your plan into daily, weekly or monthly mini-goals. For example, you might get your budget in order in January, then spend February organizing your records. To help you break up the tasks, Fidelity Investments provides a monthly guide to walk you through your 2013 financial resolutions.
No. 6: Check in frequently to measure progress. You can't make a resolution, then wait until next December to see how you did. For example, if you want to save $5,000 in a year, divide that by 12 and concentrate on saving $416.67 each month. A monthly check-in is best, says Cutts. If you check in too often, you could become discouraged by a lack of progress, while waiting too long gives you too much time to veer off track.
No. 7: Think process, not results. "Highly successful people understand that the process is more important than the end result," says Blair. If your goal is to save $5,000 by the end of the year, focus on the steps you're taking each month to get there, such as cutting back on that daily Starbucks coffee or increasing your retirement contribution. By doing so, you reprogram your habits. If you can change your behavior, the result will take care of itself.
No. 8: Make it automatic. You're less likely to break your resolution if you automate it. When Elle Kaplan wanted to increase her savings, "I resolved to start saving at least 20% of my income," she says. Her resolution stuck because, "I made it automatic each paycheck." Using those savings, she started her own investment firm, Lexion Capital Management, with no outside financial support.
No. 9: Get an accountability partner. It's good to have someone around to help you stay committed to your goals, but if you're trying to improve your financial life, it’s important that you enlist someone who is good with money. Find a friend who is living debt-free or who has a healthy savings account and ask him or her to guide you. You can also seek professional help, such as a coach, money therapist or financial adviser, Cutts suggests. Finally, tell your accountability partner what you expect. For example, if you want weekly check-in calls, say so.
No. 10: Don't forget rewards. When you have small successes along the way, give yourself a pat on the back. "Reward yourself with something that will not take away from your goal," Cutts says. While it's probably not wise to spend your newfound savings on a trip to the Bahamas, "you can find something inexpensive and enjoyable to celebrate your success," Cutts says.
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To help reign in spending, differentiate between wants and needs. Just because you want it doesn't mean you need it. Before considering a want purchase figure out how much effort it takes you to earn enough money to pay for it, and decide if that item warrants that much effort. Don't forget to include finance costs if you're not paying cash.
Start by calculating your “fun” money. That is your take-home pay minus your required monthly payments. Then divide that number by the number of hours you worked to obtain your “effort”. For example (using easy round numbers) let’s say your monthly take-home pay is $3000. After making your required monthly payments you have $1000 left “fun” money. You worked 160 hours that month, so your “effort” to earn that “fun” money is $6.25 per hour. What this means is that for every hour you work you generate $6.25 that you could spend on wants.
Now whenever you contemplate making a want purchase divide its cost by your “effort” number. Is that wanted item worth that much work? For example, let’s say you want to buy a music CD for $17. Dividing 17 by 6.25 yields 2.72 hours – almost 3 hours of work time required to pay for this CD. Doing what you do to earn a living, are you willing to toil almost three hours to pay for that want? Maybe, maybe not – the point of this exercise to is realize how hard you have to work to earn enough money to pay for “fun”.
Note that I haven’t included savings in this model, which are mandatory if you want to avoid money problems during emergencies or want to get out from under the tyranny of working for bad bosses. You should add savings to your required monthly payments, which lowers your “fun” money. Kind-of sobers you up at this point?
I’m not saying that you shouldn’t have any “fun” or you shouldn’t splurge on wants. I just use this to remind myself what my limits are and how hard I have to work for that “fun”.
Living within your means is an eye opener for many young people. They think they are entitled to all the new gadgets as they come on the market. As parents we try to give it all to them. Maybe we should be careful and prepare them for the real world. If you can't afford it don't buy it. Save for it! My 30 year old son has finally started to "get it". Keeping your finances in order will make for a better nights sleep.
Also, try to keep a monthly log book of all expenses made by credit card and cash during the month. Keep it in simple accounting as you learned in high school. Within time you will be able to project where you are spending, how much you are spending each month. Do it just as if you were working out a simple balance sheet. Once you have master this you will feel better each day about saving money.
Give yourself a cash allowance every week for dining out and shopping. When that cash is gone you are done spending for the week. Otherwise, it's way too easy running up credit card debt.
For some of us we need to commit to ourselves not to get sucked into the financial problems of friends and/or relatives. Some of us have in our lives these type of people who are just an abyss into which it doesn't matter how much financial help you give them, they will always end up broke because that is their mentality and that is what they know.
I encourage you and myself to get out of those situations now! Putting ourselves into debt for the benefit of others is not going to solve anyone's financial problems!
Just so "no!"
To all that is saying that this is the President Fault that we are in this mess. I totally agree, but it is not Pres Obama, remember the Pres Bush before him and that who fault it really is, let's all take responsibilty and blame our own spending habits and quit blaming others.
They're out to get you here.
In these days we need advices even for breath or pooh!
My resolution: try to read and listen less crap!
Happy 2015! oops
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