We’ve finally crossed the finish line in the 10k that is Christmas. Congratulations! But there’s no time to catch your breath. As soon as you’re done chugging that bottle of Gatorade it will time to take your place at the starting line for the marathon of the new year.
This time things will be different, you say. You’ve learned from your mistakes. You’re going to make a plan and stick to it. You’ll cross the finish line next December with your head held high, triumphant in your many accomplishments. Your exemplary spending and saving habits will be the talk of the personal finance blogging community. It’s all going to get better right at the stroke of midnight.
So you say.
But wasn’t that the story last year? Didn’t you plan to save half your income, stop going out for meals, stop shopping for things you don’t need, pay off all your credit card debt, start a savings account for your as-yet hypothetical children and achieve financial independence??
I admire your optimism, but you can’t change your entire lifestyle overnight – even if the night is December 31st.
This year, I encourage you to do things differently. Learn from your mistakes, make a plan and stick to it. Forget your end goal of having a savings account so full your bank kicks you out. Instead, resolve to make some small, incremental changes that will put you on a path to better finances.
Allow me to put on my coach’s hat and whistle and present you with five financial new year’s resolutions you can actually keep.
Resolution #1: Cut out one unnecessary monthly expense
If you resolve to trim all the fat out of your budget, what’s going to happen?
Nothing, that’s what.
All those monthly charges they’re for things you really need. Netflix, Prime, Spotify, Hydro. You can’t give those all up just in the name of personal finance!
Instead, choose one expense to cut out. Pick just one thing you get a monthly bill for and find a way to give it up or get it free.
A great place to look is your monthly chequing account fee. If you have a paid account with a big bank, you could be paying up to $30 a month for your bank account. If that’s the case, switch over to a no-fee chequing account and this resolution is in the bag.
Resolution #2: Save five dollars a week
What? Five dollars a week? That’s nothing. You could melt a five-dollar bill in the microwave once a week, and get more enjoyment from that than anything you could spend it on, and you wouldn’t even notice the difference in your finances. How can it possibly be worthwhile to save $5 a week?
But remember last year when you resolved to save 10% of your income but instead you didn’t save anything and bought a Nintendo Switch?
The idea here is not to get rich. It’s to get in the habit of saving. So follow through on this resolution and in a year’s time you can brag to your friends that you put money in your savings account every week of the year.
Resolution #3: Make one extra debt payment
You could resolve to pay down all your remaining student loan debt by the end of the year, but that would involve living like a student. You’d have to rent a room in a house with five other people, eat nothing but KD and ketchup packets you borrowed from a fast food place down the street, and work as a barista on weekends. No, thank you.
Most finance writers will encourage you to eradicate your debt immediately no matter the cost, but the reality for most people is that debt is part of life. It’s just not feasible to make all the lifestyle changes it would take to pay it off quickly.
So this new year, resolve not to eliminate debt from your life, but to make one additional payment on one loan. You could choose your mortgage, car loan, student loan, credit card, line of credit, or anything else you pay a monthly bill for. Come up with a plan to make the equivalent of one extra payment by the end of the year. It could be as simple as dividing a payment by 52 and saving that amount every week (that’s $5.77 a week for a $300 car loan payment).
Some creditors might let you increase your regular payment amount directly, too. The math is simple on this one: increase your payment by 8.33% to make the equivalent of one extra payment per year.
Resolution #4: Cash out your points
If you’re like most Canadians, you’re hoarding a personal treasure chest of rewards points that you probably don’t even know the value of. Even I was surprised to find out that between my credit card rewards and grocery store loyalty program, I’m sitting on over $1,000 worth of rewards points as I write this. How did that happen?
The problem with keeping points forever and ever is that they actually become less valuable the longer you wait to redeem them. Some programs actively reduce the value of points. But even the ones that don’t engage in this practice still lose value because of inflation. $100 in points may always be worth $100, but prices will go up and your points will buy less. One study predicts grocery prices will rise by 3.5% this year led by vegetables, which could become 6% more expensive.
According to my local discount grocery store’s most recent flyer, everyone’s favourite vegetable, brussels sprouts, are $5.45 per kilogram. Google says there are about 100 brussels sprouts per kilogram, so $100 currently buys roughly 1,834 brussels sprouts. But if the price goes up 6%, this time next year you’ll only be able to buy 1,730 brussels sprouts for $100.
So, before inflation takes a bite out of your rewards points (pun semi-intended), redeem them! Money now is always better than money later.
Resolution #5: Make a $10 meal once a month
If you’re in the habit of eating out (or ordering in) all the time, the cost of all those restaurant meals can really add up. Appetizers, extra drinks, delivery fees and Uber rides home can make these meals into a huge unnecessary expense.
But you’re busy, you hate cooking – you’re not great at it either – and a future that’s all about staying home is bleak and boring. Finance experts who advise giving up restaurants (and coffee for that matter) forget that there’s more to life than money. So instead of going cold turkey (just one of many cheap meal choices, btw), challenge yourself to stay home and make your own meal for under $10 once a month.
Make a game of it. Google ideas for budget-friendly recipes. Check out your grocery store flyer for deals. Rediscover beans and wieners. Find an $8 bottle of wine and eat a $2 can of tuna. Or get your friends involved and pool your $10s to make and share a magnificent meal together.
Will this resolution give your bank account much of a break? Probably not. But it might get you in the habit of trying new things, exploring new meals, and finding ways to feed yourself and be entertained for less than it costs you now. It’s worth a try.