Stick to it!
We're six weeks into the new year and I have a question. Did you make money resolutions? Have you stuck with them? I saw a survey this week that 70-75 percent of Millennials and Genzers said they were making financial resolutions for 2023. (Millennials were born 19811996; Gen-zers were born 1997-2012.) If I were a betting person and if people would be honest, I would bet that more than half of those people have already blown it. Habits are hard to break!
It's no secret the economy's been trending downward. But the doom-and-gloom headlines don't automatically mean your finances have to take a hit. If it feels like your expenses are the only thing going up, if that annual raise is looking less and less likely, or if seeing the numbers in your financial accounts brings up all the (not-so-great) emotions, it's time to make every penny count.
Down times are potentially a great time to focus on your investments and improve your bottom line, and yes – it can happen. Here are some thoughts on that.
Use a budgeting system… and then stick to it. Having a plan in place is one of the most important things you can do for your finances. Whether you're tweaking an old plan or starting from scratch, it's always better now than never. Even a few months of using a personal finance app or a plain old spreadsheet can help you understand the relationships among your income, spending, savings, and investments. But to start, you should set or revisit your savings and investing goals for both the short and long term.
Don't go it alone. Without fail, I recommend to my clients to have a weekly budget meeting, whether that meeting be between spouses, an entire family, or just you and your pets, there needs to be at least one time a week that you make a point of looking over what's happened with your money. It doesn't have to take long, but it does have to happen. What has cleared your bank account? Has anything been charged to a credit card? (If so, pay it THEN.) Have your automatic deposits arrived?
And speaking of automatic, automate as many bills as you can. We're living in an automated world and we should take advantage of that. Setting-and-forgetting reduces your chances of being hit with late charges and helps you avoid tacking on interest to your balance or taking a hit to your credit score. And especially for older people, automation helps to prevent something not being paid if you were to have a health or other emergency that takes you out of your routine. And what if your children suddenly have to figure out your “system”? You'll have far fewer worries if you know everything is set up for automatic payments.
And while you're at it, you'll want to auto-deposit a portion of your paycheck (or pension) into a savings account for rainy-day funds. Since you can't log on to social media these days without seeing posts about layoffs, make sure you have enough to cover at least three to six months of expenses in case you get that “meet with HR” notification and find out your position's been eliminated. I'm going to say that again: Everyone needs a rainy day fund!
Shop smarter, not harder. The “shop 'til you drop” days are behind us. Now we shop with our smarts…and with a little help from our friends, our friends being cash-back sites and discount codes. Cashback sites are almost too easy to use. They partner with nearly all the big-name retailers and usually offer a mobile app or a third-party browser extension to click before checkout that automatically gives you back a percentage of your purchase (sometimes up to 20 percent). Being paid to shop? Yes, please.
Discount codes are also your friend when it comes to shopping smart. Many sites offer referral bonuses or savings that you can share with a friend. And here's another shopping hack: saying BRB (be right back) to your online shopping cart. Retailers often send an abandoned cart email or push notification with a savings incentive encouraging you to complete your purchase. I make a practice of loading anything I'm thinking about purchasing into the cart for that online purchase, then leaving it alone for a week or so to see what pops up. (In the meantime, I almost always look for that same option locally. You know I support local businesses whenever I can.)
Make your money make money. I have already reiterated the importance of setting aside savings for worstcase scenarios, but having too much sitting in a low-yield savings account or a checking account doesn't do you any favors. Putting money into taxadvantaged accounts like 401(k) s, IRAS, HSAS and annuities (the latter especially for those of you whose 401(k) and IRA days are behind you) is a great way to help your money grow tax deferred. And please, for the love of all that is holy, if you're working and your employer offers any matching funds (Who doesn't love free money?), do NOT miss that chance. I'm not a math whiz, but even we know: The more savings you have in your accounts to compound, the better.
And while you may not have much of a stomach for investing after this past year, I constantly remind folks that although people tend to hesitate about investing during economic downturns, the old adage “buy low, sell high” does typically ring true. And if you need help getting started or figuring out how and/or how much to invest, I'm happy to offer guidance.
The bottom line? It's never too late to start getting the most out of every single buck. Even if the economy is down, it doesn't mean you have to be – especially if you have the know-how (and discipline!) to make smart financial decisions. Even one takeaway or small change of habit when it comes to your regular, discretionary spending can help you save big in the long run.
Barbara Runnels Coats, MBA, FICF, RICP, Modern Woodmen of America Financial Representative*