Wednesday, January 6, 2010

Your Financial New Year

An article by Karen Blumenthal appeared in the 30 December 2008 edition of The Wall Street Journal. It caught my eye and engaged my brain.  She is a favorite author of mine.  Her down-to-earth approach to personal finance provides fertile ground for my Midwestern roots.  In that article, she took the holidays of the year and focused on an action households could take to fix their finances in 2010 that “fit” that day.  In a similar vein, the National Foundation for Credit Counseling released their survey of the financial New Year’s resolutions of 6,100 households.  The results of the survey reveal that NFCC’s respondents might find Blumenthal’s prescriptions to be distasteful – as are many good “medicines”.


The NFCC found that the number one New Year’s resolution for households ranked as follows, each with the percentage that chose that action as their number one resolution.  (The press release is attached.)


                Decrease debt                                                                  76%

                Improve my credit score                                               11%

                Decrease dependence on credit cards                     7%

                Increase savings                                                                 6%


This is disheartening.  While decreasing debt is certainly admirable and some would say reducing debt is a form of savings, as it improves one’s net-worth, the fact that only 6 of 100 households ranked increasing savings as their number one priority for 2010 is much less than I would have imagined.  This is particularly true, given the events of 2008 and 2009.  Moreover, the fact that fully 94% implied that they had issues with their credit behavior is frightening.  While it is challenging to accomplish, most financial planners suggest that we should save, at least, 10% of our income for retirement, emergency planning, college savings, and other goals.  So, since most of us don’t, what can we do to celebrate the holidays of 2010?  (My gratitude goes to Ms. Blumenthal for providing the idea.)


New Year’s – Vow to increase your rate of savings.  Have money automatically deducted from your paycheck and put in your retirement plan, your savings account, your money market fund, or other accounts dedicated to your goals.  Do this today, if you haven’t already.


Martin Luther King’s Birthday – To celebrate the diversity of our country, review your investment plan to make sure it is diversified – across sectors, industries, market-capitalization, countries, etc..


Presidents’ Day – Reduce your borrowing.  (Since politicians have trouble with this one, why not use their day as the day to take actions that are the opposite of theirs?)


Religious Holidays – Whether you celebrate Easter, Mawlid-al-Nabi, Shavuot, the Equinox, or other religious holiday, take some time to celebrate your birth and heritage.  Consider the financial lessons, good and bad, that you have learned from your family, friends, and religious affiliations.  Do your best to practice the “good” and to cease practicing the “bad”.   It will build human capital in you, your most precious asset.


Memorial Day – First, be grateful for the sacrifices of others that have allowed us to have our freedom and, then, talk to your family about estate planning. Make a plan for your own death – it will happen – that incorporates your goals for giving to others.  Make sure you know the plan of your parents and, if they don’t have one, suggest they get one.


Fourth of July – Ask yourself if you are financially free.  The American Revolution occurred because we did not want to pay taxes, without representation.  Many have chosen to be servants to those to whom they owe money.  In a sense, they have voluntarily sacrificed their freedom, in exchange for working to pay interest.  Choose freedom.


Labor Day – Remember what Ben Franklin said, “At the working man’s house, hunger looks in, but dares not enter.”  Good work is a blessing and protects us from recessions and economic change.  Our gift to our economy is our labor and creative contributions working together to increase the well-being of all.  Moreover, those that work hard with specialized training and unique personal skills will always be valued.  Hunger will not knock on your door, if your house is built on productivity.


Thanksgiving – While Thanksgiving is my favorite holiday, giving thanks for what we have is a key to making financial progress.  Make a list of what you think you need, as well as what you want.  Focus on your goals and your needs will become clearer and will be satisfied.  Focus on your wants and you’ll always want more.


Christmas, Bodhi Day, Hannukah, the Winter Solstice, Id al-Adha, or Yule – First, look up which group celebrates each of these holidays.  Then, every day before the next Holiday season, remember the gift of giving and what truly matters.  The best day I ever had with my father was a late-fall day spent duck hunting and we did not kill a single bird.  Or, was it one of the days we spent together working with his business? My children remember trout fishing, while not remembering that very expensive meal at the restaurant on Broadway in New York.  Remember, happiness and satisfaction are not “pricemore”, they are priceless.


Happy New Year.  May yours be a financial success.


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