Monday, January 7, 2019

10 Life-Changing New Year's Habits

In general, what I've understand about New Year's resolutions is that they don't work for most people. Since I'm like most people, I don't bother with resolutions. If I don't really have any goals set, then why would they work now. What's more important is to always have written goals: short-terms (daily and weekly), mid-term (monthly) and long-term (yearly). use the steps below to get started -- not just started. Make them a habit.  

Most resolutions fail about the third week in February. But new habits to replace old habits take a bit longer. Plan for at least 66 days. Not sure where that number originated, but 60 to 90 days seems to be the consensus. 

Here's some goals passed on to me by an instructor at the Online Trading Academy. So hats off to Larry Jacobson, in my opinion one of the great instructors, thought I haven't met a bad one yet at the Academy. His points are excellent, but I've re-written them slightly to suit my own experiences.

1. CREATE A MONTHLY BUDGET. No one likes to do this, but it is the one singular important thing you can do. And make it a habit, not just an exercise you'll do for this year. All you need to do is sit down an track your daily expenses. The first line of your budget must be savings. Pay yourself first. Doesn't matter how much, but your goal should be at least 10 percent of your pay, minus taxes. (Some gurus says gross income, before taxes, but net income, after taxes is more attainable at first. But start somewhere now, even if it's $20 per payday.) 

Start daily, then once you get in the habit, weekly; maybe in six months to a year you can do it monthly, like I do. I use some online tools like Mint or Personal Capital to help take some of the drudgery out of it. If you don't do this, nothing else matters, in my opinion.

2. HAVE AN EMERGENCY FUND. Larry Jacobson missed this, but I'm sure he meant it in his savings step #6. You MUST have an emergency fund, without fail. Ramsey suggest $1,000, which is a good start. But in today's world, it's a little low. 

When Ramsey wrote this first book in the 1990s, this $1,000 is now about $1,700 in today's dollars. My goal would be $2,000 at first. Then, as you can, keep funding this emergency fund until you have three-month's take home pay (I've attained 12-months and I sleep like a baby. I don't care if my $3,500 A/C unit blows up. I got it covered. Unemployed? Not worries there either. And don't forget to refund if you have to use these funds.

And don't use this unless it's an true emergency. A big-screen TV doesn't count. NOT HAVING AN EMERGENCY FUND CAN HOLD YOU BACK MORE THAN ANY OTHER FACTOR.

3. TAKE INVENTORY OF YOUR BAD DEBT. Namely credit cards, installment credit (like retail stores or that stupid loan for a TV or furniture) and car loans. Repeat after me: Consumer debt is bad; it is holding you back. Your mortgage, should you have one, at this point is not included at this step. More on that later. 

List your debts by highest balance, and then highest interest rates. There are two schools of thought on this. Pay the highest interest rate off first, making minimum payments on your other debt until the rest are paid. Or as an alternative, which Dave Ramsey is in favor of, and is the method I used, because it involved a psychological factor, is to pay off the lowest balance first. This tends to create a reward. Then use that payment to start on the next. Post these on your refrigerator and cross them off as paid. I paid my car loan off last, then put that payment into a special bank savings account (or  you could use a money market fund), and then pay cash for your next car (don't buy brand new.)

Being debt-free is on the most liberating financial things I've ever done. In 2010, I owed $84,000 (without a mortgage). Four years later I was debt free. I haven't look back since.

4. HAVE A FINANCIAL PLAN – There is nothing worse than being charged late fees on top of interest. Make a point of identifying the dates that all your expenses are due and make sure to pay them in plenty of time to avoid any unnecessary fees. You should also use your financial calendar to help you determine how and when you will be paying off your highest interest-bearing balances: A month, a quarter, or a year? If possible, automate your payments as much as you can.

5. CREATE A FINANCIAL ROUTE. Or as I call it a Financial Plan. We all live very busy and hectic lives, but it is extremely important that you put aside at least one hour a week to review all your finances. Ideally, you should do this with your spouse, partner or significant other. The more you work as a team and hold each other accountable, the faster you will reach your overall financial goals. I set aside every Saturday AM as I'm ingesting my first dose of caffeine. Once you're in the habit, it doesn't take long at all. You might find areas we're you need to improve or take corrective action. 

6. BUDGET AT LEAST 10% TO YOUR SAVINGS OR INVESTMENTS – Imagine when you were very young and a wise parent or grandparent told you that if you saved $.20 out of every dollar you earned for the rest of your life, you could retire at an earlier age, and you could enjoy your financial freedom. 

Sadly, if you never received this sage advice you must take it upon yourself now to set aside at least 10% of your monthly income toward your emergency fund, savings or retirement account(s) so you too can one day reap your own financial freedom.

You don't need to start at 10% if your budget if you can't afford it or are using excess cash to pay off debt come first, but start somewhere. But just do it. Best to do both, but the emergency fund comes first. After I became debt-free, I was able to contribute 20% to my retirement and savings accounts. And then add a $1 to each weekly or monthly paycheck. Watch it grow. Certainly you can find a $1 each payday. If you get paid weekly, this will create a $2,366 cash emergency fund.

I read on some blog that it's OK to have a credit card for emergency funds. I'll be blunt: Don't be that stupid. 

7. TURN YOUR DREAMS INTO ACTION – To help you plan and reach your financial goals sooner, you need to take action NOW! A simple way to accomplish your dreams is by attaching dates underneath your dream board photos. This simple change will create the urgency you need to get off your butt and take action toward achieving your financial goals. Remember, dreams are for bedtime, goals are for success. Review them often. Make them visible; don't hide th em away in a seldom read note-book. 

At the Academy, we call this creating your "Why." This is why are you taking this effort. Have a lot of whys. Brainstorm it and prioritize. Or as Matthey McConaughey says, it find your Hill. Don't stop climbing your hill.

8. MANAGE YOUR NET WORTH – To help you calculate your net worth, you must first take an inventory of all your assets (cash, investments, real estate, collectibles, patents/licenses) and your liabilities (your outstanding balances: mortgage, car loan, credit card debt, etc.). You current net worth (positive or negative) is determined by subtracting your liabilities from your assets. If the value of all your assets is greater than the total of your liabilities (e.g. debt), you have a positive net worth. Your long-term financial goal should be to have a large enough positive net worth that you can live off your assets. Make a resolution this year that you will do what is necessary to achieve a positive net worth. 

I use a spreadsheet on a monthly basis, but I also use tools like Mint or Personal Capital to track this. These tools help my budgeting exercises and are actually kind of fun. It helps to see what progress I am making. If you're not making progress, it will help identify areas you need to improve. 

9. BECOME A STRATEGIC, NOT AN EMOTIONAL SPENDER – Before you begin doling out your hard-earned cash on the next must have product or service, ask yourself the following strategic question: ‘How will this product or service contribute to my personal finance goals?’ You should never emotionally spend money without first researching and asking yourself ‘why do I need this product or service in the first place?’ Emotional spending to alleviate some emotional void in your life is never a wise idea. Make a point this year to cut out any unnecessary spending and re-direct that same money to your debt-reduction, savings or retirement account(s).

No impulse buys, ever. Always wait a day or two at least. Even if the salesperson says the sale is only for today, I'll bet you my next paycheck there will be another sale, and soon. 

10. EARNING MORE MONEY IS NOT AN EXCUSE TO SPEND MORE MONEY – Just because you get some extra zeros at the end of your paycheck, does not mean that you should add extra zeros to your debt. So many people talk themselves into believing that if they just earned or got more money in their life that would solve all their financial problems. But the reality is…unless you have a plan to create good financial savings and spending habits, you will just continue to spend more and more, getting yourself into even great financial debt.

11. CHANGE YOUR LIMITING BELIEFS ABOUT MONEY – Most importantly, you need to stop listening to your own limiting beliefs about money. The only reason you are broke is because your life is broken. You have to start telling yourself, ‘I can save money!’ ‘I can be wealthy and have financial freedom!’ The only one holding you back from achieving your financial goals is YOU!
If you'd like to know more, please visit my Get Inspired Page

One of my favorite "mentors" is the late Jim Rohn, who was a mentor to successful people like Tony Robins, among many others.

May the new year bring you peace of mind. But don't wait. Do it now. 

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