New Year’s Financial Resolution

I view the entire week between Christmas and January 1st as a time for personal reflection  and evaluation of the present year.  And then I slowly set goals that I know are attainable and that easily fit into the new routines that I will set for the new year to accommodate them.  Every aspect of my life is on the table and subject to close examination and possible revision.  In this post, I’m focusing on my finances.I like to start with my finances because where my money goes is a reflection of my values.  My financial life is guided by the two core principles  I learned from my parents.  My mother used to say, “Only a fool spends everything she makes” and so I make sure every month has a good buffer after savings, investments, giving, spending, and paying bills.  I learned from my father to, “pay yourself first” as a means for building wealth.  However, the nuts and bolts of my finances have been guided primarily by Suze Orman and her book, “The Road to Wealth”.

Each year, I begin with looking at my monthly budget.  Yes, I like to know where every cent is going as a means to maximizing my savings, giving, and spending capacity.  I set my budget for the entire year, beginning with how much I am going to save, invest, give, spend, and pay in bills each month.  Each month has its own unique obligations and these are taken into account.  For example,  birthday presents, car registration, and sorority dues are all due on a certain month and so I like to plan for them accordingly each year.  Once the budget is set, I go about making it all as automatic as possible.

An excellent credit rating and financial security help me sleep better at night.  So, I make sure to check my credit each year through all three credit agencies.  You can do this for free using AnnualCreditReport.com.  You’ll want to ensure that your accounts are in order and that the information about you is accurate and most importantly, you’ll want to ensure that no one has opened an account in your name! Identity theft is a serious problem that is a headache to fix and this is one way to ensure no one has stolen it.  If your credit is not stellar, this will be the first step toward working to repair it.   Keeping your debt to credit availability low is also important.  You want great credit so that you can take on “good debt” at the lowest possible interest rate.  Good debt enable and empowers you to build, like a home mortgage, car loan, business debt, and education.  But be wary of opening too many credit cards or lines of credit–they encourage greater spending on consumables.  I learned many years ago that the most important thing you can do build great credit is to pay your bills on time, every time.

To accomplish this, all my bills (and most of my charitable giving) are on automatic bill pay with my bank so that I am never late with any payment.  These are easy to set up and to change if you need to.  I’m a fan of online banking and I’m also kind paranoid so I change my username and password frequently.  I’m also careful to close the browser as soon as I log out. Both are tips I learned from a cyber security workshop.

I’ll make a plug for charitable giving beyond giving to your local church (if you have one).  Not only does giving make the giver feel great, but it is a way to contribute to the world.  I like to give to efforts that fit with my personal values and I re-examine both my values and my financial commitments to the work each charity does at this time of year.  I am blessed to be in a position to give, not because I’m rich, but because I do not live an extravagant life.  I feel an obligation to help my fellow human beings in the way that I can.  My son was a Peace Corp volunteer.  Well, I’m not brave enough and I don’t have the energy to be on the front lines like some folks, but I can help fund their incredible efforts.  My monthly giving includes: scholarship funds to benefit African American college students, Women for Women International, an NGO that helps women learn a trade to become self-supporting, Doctors Without Borders, KCLU (our local public radio), PBS, the annual fund at the University where I work, and new this year is the Boys and Girls Club of Southeastern Michigan (serving youth in my hometown of Detroit) and NAMI, an organization that supports individuals and families like mine who struggle with mental illness.

The quiet week between Christmas and New Years is also a time when I take the time to examine the returns on all my savings and investment accounts and make changes if it seems prudent.  This year I am increasing my monthly retirement contributions (directly from my paycheck) with TIAACref.  In truth I do this every year.  I also re-organize my existing stock portfolios for hopefully better performance with a somewhat moderate risk.  If I need to, I increase my monthly automatic  investments and savings.  I like TrowePrice Automatic Asset builders.  These are easy to set up, move funds around, and additions are automatic!

My son introduced me to a new method of investing using an app called Acorns.  You attach it to your debit card account and it automatically rounds up each purchase to the next dollar and accumulates the change until it reaches $5.  Once the coins reach that $5 threshold, it invests the money in the investment portfolio of your choice.  In the couple of years my son has been doing this, he has earned over $350 from his investments.  I’m going for it this year! Just a quick note, Suze Orman’s book for young people, “The Money Book for the Young, Fabulous and Broke” was a great gift to each of my kids and now our grand-daughter. My son clearly took the lessons in it to heart.  Back to this new way to save and invest. Personally,  I don’t use my debit card everywhere; I prefer to limit myself by using cash to curb spending and to save time recording every purchase in my checkbook.  So, I take out a set amount of “mad money” cash at the beginning of each month.

This year, I’m keeping my monthly “mad money” at its current level  since I rarely spend it all.  I use it for lunches, small purchases, books, flowers, and spur of the moment donations.  I’ll also keep putting the change from these purchases into my coin collector each week.  During that last week of the year, I enjoy rolling the coins and running to the bank for my “coins to bills” ritual.  Those bills are returned to my mad money fund, so January has a little bit of a boost.

Back to the credit cards.  I don’t believe in paying interest on credit card debt and haven’t paid any credit card interest in over fifteen years (thanks Suze), but I do believe in cash back and after a bit of research,  I added a new credit card that gives me an additional half percent on regular purchases.  My current credit card gives more cash back on restaurant purchases, so I’ll continue to use it for those.  Neither of these cards has an annual fee (I don’t believe in those either).  You can research the best credit cards on Wallethub.com. I cash out at the end of the year and it’s fun to see what I’ve accumulated by just making my normal purchases.  In truth, the cash back defrays the cost of my Christmas gifts!

We do a gift exchange, so I don’t spend a lot on Christmas gifts anymore.  Instead I buy stuff for myself during the Christmas season.  It really is the best time of the year to fragrances, jewelry, and sweaters.   I buy gift cards for retailers where I normally shop or eat throughout the year.  For example, I purchase a $100 gift card each December from Cheesecake Factory because it is one of my favorite restaurants.  With that purchase, I receive four gift cards for free cheesecake or cake desserts from January through the end of March.  Since one of my colleagues’ birthday is in March, I use the coupons as a birthday treat for her, me, and two other colleagues.  Other notable gift cards are movie theater tickets and I-Tunes gift cards at a 15% discount to purchase my music and I-phone apps throughout the year. I also take advantage of the 50-70% off during that final week, being careful to plan ahead.  There are things I plan to purchase the days following Christmas every year.

One last important financial consideration is estate planning.  I haven’t forgotten about it, but I leave all my estate planning and insurance stuff for my time off in July each year.  And no, the new year reset isn’t just about the money.  Next week I’ll write about getting healthier post menopause as it has become an area of my life that requires greater attention every year.  I hope you’ll join me and tell your friends.