6 Ways to Feel Better About Your Money in 2019
The Cut’s financial advice columnist Charlotte Cowles answers readers’ personal questions about personal finance. Email your money conundrums to email@example.com
Photo: Mirrorpix via Getty Images
It’s time to throw in the towel on 2018. We tried our best, right? I, for one, got nowhere near the bar I set in 2017, when I socked away a baffling 30 percent of my income. This year, however, I was not quite so thrifty. On the upside, I’m satisfied with where my money went: I took a long trip to South America last spring, donated to great political candidates last fall, and paid some annoying but necessary medical bills last summer. But still. I’d like to get back on the wagon, or at least more disciplined.
Where to start? I know all the things I’m supposed to do — be better about automating my savings, stick to a budget, etc. — but I’m not feeling particularly inspired or motivated. Many people take a rip-off-the-Band-Aid approach to January, but I’d rather ease my way in. Plus, that’s what research says you should do: Make small, manageable behavior changes rather than a punitive overhaul. So I asked a bunch of my favorite money experts — financial planners, psychologists, investment advisers — to send me their best, most painless advice for starting fresh in the new year, regardless of how your bank account currently looks. Here’s what they said.
- Break up your habits, even just for a little while.
“If you normally put everything on a card, try going cash-only for a week to see how it affects your behavior,” says Amanda Clayman, an L.A.-based financial therapist. “Or, if you hate talking about money, challenge yourself to haggle down a price for something.” The point is to try something new in a playful, low-stakes way so that you can shake up your routine (or get out of your rut).
Personally, I’m toying with the idea of attempting the “envelope method”: instituting a weekly spending limit, and then dividing that amount — in cash — between envelopes labeled with the days of the week. If I want to spend more on any particular day, I have to “save up” cash from other days to cover it. I’ve already labeled the envelopes, which are sitting on my desk. Baby steps.
- Make yourself an inspiration board — no, really.
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This sounds so cheesy, but that’s why I love it. Dr. Brad Klontz, the co-founder of the Financial Psychology Institute and a professor at the Creighton University Heider College of Business, recommends the following steps: 1) Identify three top financial goals; 2) Get some poster board, glue, scissors, and art supplies, and make a visual representation of those goals; 3) Put the poster someplace where you’ll see it every day, like your desk or your kitchen, and/or take a photo of it and make it the wallpaper on your phone. “Last year, we studied people in five different cities who did this, and their savings rates increased by 73 percent — no joke,” says Dr. Klontz.
And even if it doesn’t work, it does sound sort of fun, right?
- Pair up with someone who’s equally interested in getting their act together.
I know, every annoying “How to Stick to Your New Year’s Resolutions” article always recommends a “buddy” to “hold you accountable.” The thing is, they’re right — especially when it comes to finances. You don’t need to enlist someone to check your bank statements and nag you about that shirt you just bought; instead, just finding a person to talk to helps destigmatize the subject more generally. And it works: According to a 2016 survey by LearnVest, 74 percent of respondents were more likely to stick to a financial resolution if they discussed it with others, says Alexa von Tobel, the CEO and founder of LearnVest and chief digital officer at Northwestern Mutual. Her recommendation: “Find a ‘money buddy’ who you’re around often — your partner, a family member, or a friend — and check-in with each other as you both move toward your goals.” Even better, find more than one. It takes a village, I say.
Also of note: You don’t need to partner up with someone who’s better with money than you. In fact, a recent study found that people with low financial skills tended to learn more and improve their money decisions if they sought advice from peers with similar levels of financial knowledge. This backs up my personal theory that it’s better to get financial advice from someone you can relate to (and is already in your life) rather than a whiz who’s ten steps ahead.
- Think about who else might get your money someday, and put it on paper.
It’s Thursday. Do you know where your beneficiaries are? If you’re anything like most people, you probably aren’t sure. (A beneficiary is whoever receives your retirement savings and/or life insurance policies if you die.) It’s a morbid subject, yes, but don’t underestimate how on-top-of-it you’ll sound when you call up your brother and say, “Hey, just letting you know, I’ve put down your name as my secondary 401(K) beneficiary.” It’ll also make you feel generous, in a weird way, and remind you that your money management — good or bad — always affects your loved ones.
Best of all, this process takes about two minutes (or maybe a little more if you need to track down your login information — but look, you’ve been meaning to do that too). “I always remind my clients to take the time to make sure their provider has things set up how they want,” says Pari Hashemi, a Philadelphia-based financial adviser. “Too many people forget to update that information after they get divorced, have a child, or lose a family member” — and inadvertently leave their money to an ex-spouse or no one at all.
- Cut out unnecessary clutter — extra credit cards, and subscriptions or memberships that you don’t use often.
“Close down any store credit cards and cut them up,” says Manisha Thakor, the VP of financial education at Brighton Jones. Yes, this may temporarily ding your credit score (closing a credit card does that, for counterintuitive reasons explained here), but it’s like cleaning out your closet — making a mess is part of the process. And the result will be worth it: “It’s best to keep your financial life simple,” explains Thakor. “Store cards in particular tend to have very high penalty interest rates if you’re the tiniest bit late on a payment. Don’t be enticed by the 10 percent off your purchases.” She recommends having one primary credit card and one as a backup — chop the rest. “Unless you are right about to buy a home or a car, it’s fine for your credit score to take a temporary dip while you clear your credit-card clutter,” she says.
While you’re at it, look at your other recurring charges — Hulu, magazines, the Tidal subscription you signed up for just to get Beyoncé’s new album — and do some weeding. You can even use online tools like Trim and ClarityMoney to ferret out “gray charges” (like those mentioned above, or that mysterious $2.99 that shows up on your bill every month for reasons you can’t remember) and help you get rid of them. There may be a cancellation fee, but like the credit-score penalty, it’s a temporary annoyance that’ll pay off in the future.
- Do the “Three Things” exercise to become more aware of your spending habits.
Psychologist Sarah Asebedo, who is also the president of the Financial Therapy Association, recommends the following: “For at least one week, identify three good things that happen in your life every day. Write them down, along with how you felt about them and what led to them happening.” Research has shown that this exercise boosts your overall psychological health and decreases symptoms of depression (which we can always use in the dead of winter). Then, to layer on a financial component, Asebedo advises adding three good financial things to your list as well. “We often focus too much on the negative, especially with money. Recognizing the good things, even if they’re very small — like resisting an impulse buy — matters a lot for habit development over the long-run,” she says. The objective is to train yourself to pay more attention to links between spending money and your general well-being. Touchy-feely stuff, I know, but hey — it costs nothing to try.