I feel like every January, most personal finance columns encourage us to kick off the New Year with a fresh set of financial resolutions that involve finding ways to streamline our budget and save more. At the top of almost every list: give up that daily Starbucks latte.
Iím kind of tired of hearing that same tip, and feel that if at this point people havenít gotten the message then writing it one more time isnít going to persuade them to change their habits.
So letís assume that we all know itís not the smartest move to spend several dollars on that higher-priced cup of Joe every day when you can brew a less expensive version at home and put it in a go cup. This year, what else can we do to get our financial house in shape?
Bob Stammers, who heads up investor education for CFA (Chartered Financial Analysts) Institute, offered a few other ideas that I found pretty helpful:
1. Re-shop all of your insurance. Signing up for insurance is often put in the ďmust get it over withĒ category Ė a necessary financial defense move for that ďjust in caseĒ scenario that youíd rather not think about. But as Stammers points out, things change in the market, and people change every year. For example, one year you might have had a car accident, and the next few have the cleanest record. So why stay with the same auto insurance policy policy if thereís a chance that your new circumstances can save you money? Itís worth a few phone calls to see. (And donít forget to include your home, life and other policies in that check-up as well.)
2. Examine your bank fees. I spend a lot of my time shredding disclosures and statements about changes in fees, and itís easy to slip into the habit of ignoring the fine print. But in recent years in particular, many banks have added charges to their accounts. According to Stammers, some even charge people for using their bank card as a debit card Ė but wonít levy a fee if they use it as a credit card. The $3 fee here and $5 fee there add up: ďLeakages,Ē Stammers calls them. Time to turn off the tap.
3. Direct deposit Ė into a credit union with no ATM. It was that last bit that caught my attention. The direct deposit tip is up there with the Starbucks one Ė to build up savings over time, set up a plan that uses direct deposit so that you automatically have some cash removed from your daily use each month. But I liked the credit union with no ATM option because that way, we canít easily bypass the system and sneak some cash out.
But hereís the big idea Ė and the one that I think a lot of people miss when theyíre thinking about their financial goals: Financial planning isnít about maximizing returns. Itís about maximizing the probability of reaching your goals by consistently, and continuously, putting money aside for your future.
In short: ďYou canít count on investments to make a certain return over time. The only thing you can count on is continuously putting money away,Ē Stammers said.
So hereís the question that you can resolve this year to ask yourself each day:
Can you save before you spend?
The author is solely responsible for the content.