I noticed on various social media platforms this past holiday season a plea posted and reposted by many. It said “Santa, for Christmas this year I would like a fat bank account and a skinny waist, please don’t get the two confused like last year.” For many adults January is the month of diets. People begin new programs to cut back on calories and spending. Sadly, once the initial enthusiasm has warn off these goals are forgotten and old patterns are repeated. Increasing your wealth and decreasing your waistline are long term projects that seldom are accomplished quickly. Therefore adopting a financial program that you can live with is the key to success. Along the lines of diets which advocate eating smarter not less here are eight tips for Financial Happiness in 2016.
1 – Don’t be penny-wise and pound foolish. If you attempt to reign in spending by cutting back on little splurges, you are likely to feel broke while saving little money. Instead of forbidding yourself your daily creature comforts, look to broader changes that save big money. Like consolidating credit card debt on a 0% interest (offer) credit card. Depending on how much debt you are carrying this can save you hundreds of dollars every month. That change will more than cover your daily Starbucks obsession.
2 – Don’t spend good money after bad. Everyone makes mistakes. If you overspent on a home and now the maintenance and carrying costs are killing you, sell it and move. If you bought a timeshare that you never use cut your losses and get rid of it even if it means taking a loss. If you invested in a stock which tanked and isn’t likely to rebound in the near future, get out! Move the money that is left to an investment you believe in today, instead of waiting and hoping to get back the money that has been lost.
3 – Cancel memberships and subscriptions you don’t use. Take a good look at your credit card bills and pay pal account and be sure that any subscriptions or memberships you are being charged for, you actually use. If you don’t use them cancel them. Some places make it difficult to cancel and it may even take you a couple of months to stop getting charged.
4- Simplify/Consolidate your Bill paying. In today’s world it is very easy to have bills direct paid from your bank account or put on a credit card. Instead of spending hours paying bills utilize apps and online bill paying. Most companies have the option of storing your information so that all you need to do is login, quickly review charges and then click one or two buttons to pay the bill. One word of caution; don’t neglect to review charges just because you have simplified the payment process.
5 – Actively Manage Your Debt. If you have debt or need to liquidate assets to cover an expense how do you decide what money to use? Be sure to consider interest rates, taxes and penalties. Often people have multiple sources to find money when it is needed. The cost of that money is the opportunity cost, taxes, interest and penalties that have to be paid to use that money. For example if choosing between withdrawing from an IRA or carrying a balance on a low-interest credit card, the taxes and penalties involved in withdrawing from the IRA are a critical factor. It is important to look at these hidden costs when deciding what money to use.
6 – Live with-in your risk tolerance. Different people handle risk differently. One person may have highly fluctuating income as a self employed consultant, while another has direct deposit from a stable job they have held for 20 years, with modest reliable increases throughout. Spending whether it be for luxury items, vacations, or unanticipated expenses can cause anxiety for some while others are unaffected. It is important to know your comfort level and the comfort level of your spouse so that you can budget and save appropriately. If your income fluctuates and risk tolerance is low it is important to have a large liquid emergency fund. However if your income is stable and your appetite for risk is high keeping funds liquid is less important.
7 – Update/Draft a Will and purchase Life Insurance. Dealing with estate planning can be stressful and upsetting. However knowing that your loved ones will be taken care of and preserving the wealth that you have accumulated can bring you peace of mind. Simple changes like re-titling assets, updating beneficiaries on employer provided insurance policies and setting guardians for minor children are just a few of the tasks that should be completed and an attorney can help you through the process. We can recommend someone to help you.
8 – Hire a Money manager/ get a free consultation. At Personal Asset Strategies, Inc. we provide potential clients with a complimentary portfolio review and analysis. Whether or not we are ultimately hired we provide free feedback to potential clients about their portfolio structure and investments and help them to organize their financial goals and plan a financial strategy.
For people who don’t have the time, interest or financial savvy to manage their own investments hire someone to do it for you. Unlike stock brokers, as fee-only planners we aren’t paid commissions. We are paid a percentage of the assets under management which means that the better your assets perform the more money we make. Client’s best interest is our best interest. It is critical with a highly fluctuating stock market to constantly review and analyze your holdings. By having a professional advisor oversee your investments you are more likely to preserve assets during a downturn and increase returns overall.
Amanda Jones, Esq. is an Attorney and Financial Advisor at Personal Asset Strategies, Inc. with offices in Westbury, NY, Short Hills, NJ and Boca Raton, FL. Please contact Amanda if you have any personal finance questions or questions about your investments. (516)248-8811.