Money Rehab with Nicole Lapin - Financial New Year's Resolutions That Actually Work

Episode Date: December 28, 2023

66% of Americans say that they plan on making a financial New Year's Resolution for 2024. But way too often, our resolutions set us up to fail. Here are five New Year's Resolutions that actually work. Want to start investing, but don't know where to begin? Go to moneyassistant.com and meet Magnifi, your AI money assistant, designed to help you make a plan for your financial goals. Want one-on-one money coaching from Nicole? Book a meeting with her here: intro.co/moneynewsnetwork 

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every occasion, and every celebration. Be sure to check them out at justinwine.com and receive 20% off your order for a limited time. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. So I famously am super into New Year's Eve. I know that the parties can be a little anticlimactic, but I absolutely love what the day represents. I mean, it's a chance for us to all think about not just what

we want 2024 to look like, but also how we're going to get there. The how question is really where New Year's resolutions comes in. And when we sit down to make our resolutions, money pops up quite a bit. And quite a bit is kind of an understatement. 66% of Americans are considering financial resolutions for 2024. But resolutions can be a real hit or miss. I'll own up to the fact that I have definitely made resolutions that I probably abandoned by like January 20th. And that's because way too often our resolutions set us up for failure. Normally, we're way too ambitious to be realistic. I see this happen all the time. Last year, I spoke to a woman who made her 2023 resolution

to pay off her student debt, but she had tens of thousands of dollars outstanding, and she didn't have the kind of income to make those payments and also, you know, eat. Here's another one. I have a friend who shall remain nameless who said she was going to contribute a thousand bucks a month to her retirement account. So fast forward to June, I checked in with her and she said that a couple months earlier she got hit with a surprise bill for her car. So she missed one month of making a retirement contribution and then just abandoned the resolution altogether and stopped making monthly retirement payments at all. And that's what we need to avoid, making a resolution

that is so big that it's impossible. And then in the process, we get so discouraged that we don't even take the smaller steps to the finish line. All right. That being said, I personally don't believe the answer is to cast metrics to the side. I love data. I love a good number. But I have seen psychologists recommend leaning away from metrics and instead framing resolutions with less or more language. So instead of saying, I want to exercise every single day in 2024, just saying, I want to exercise more in 2024 than I did in 2023. But in my experience talking to people about money for a zillion years, I don't really think that's the best way to meet your financial goals. I just finalized my 2024 financial plan for my business and I

wasn't like, hey, I want to make more money than I did last year and I want to spend less money than I did last year. That wouldn't be helpful at all. So whether you're setting goals for yourself or your business, you need financial projections so that you can plot out a roadmap to reach those goals. Because your money goals will have price tags. So thinking in vague terms of more and less isn't going to help you when you're confronted with a stone cold number. So the trick here is to Goldilocks it. You want to give yourself metrics, but you want the metrics to be just right and not too ambitious. With that in mind, here are some simple resolutions to kick off your year on the right foot. Nothing too complicated, just easy changes that can make a big difference if you stick to them for the whole year. And I also threw in, for you commitment

phobes, a resolution that you can stick to for just one month. Number one, stop paying sneaky fees. Let's avoid those hidden fees this year, those fees that are just totally unnecessary and are mooching off your bills. Everyone from the Biden administration to the FTC to the state of California is trying to ban those hidden fees in 2024. But legislative change takes a long time, so why wait? You can make your own ban that goes into effect a lot sooner than whenever the politicians get around to voting. Imagine, for example, your bank tells you that you can open a new savings account and earn 5% in interest on that transfer, but then, sneak attack, you have to pay some sort of fee for opening the account. Depending on how much money you're transferring, that fee could significantly shrink the benefits of the interest rate. The trick here is just knowing where the fees are

hiding, which are usually in plain sight, just in the fine print, or the final checkout page if you're ordering something online. And if the fee is so well hidden that you pay it without realizing it, this is not how your story ends. You have every right to call and dispute a hidden fee. But there are some preventative measures that you can take too. If your electric company, for example, wants you to pay directly from your bank to avoid fees, take a minute to set that up and make sure you have enough cash when your bill hits. Hopefully, by this time next year, we will all be free from hidden fees. But for now, hidden fees are costing Americans

tens of billions of dollars each year. But that doesn't have to be you. Number two, pay off your credit card balance in full every month. I know you know you should be doing this, but are you actually doing it? Because 65% of Americans say they carry a balance on their credit card month to month. The average credit card interest rate is just around 23%. And because of the power of compound interest, that can really add up if you carry a balance on your card. I'll give you an example. Say you want to buy a new cell phone, and I'm just going to say it costs 500 bucks for easy math. If you put that on your credit card and you don't make any payments, after one month, you'll owe $509. But after six months, you'll owe $560. And then after a year,

you'll owe $629. So just know that if you're putting something on your credit card and you don't plan on paying it off right away, you'll be paying a 23% premium, which is a hell of a lot of money. I know that truly everything is more expensive now, so our credit card bills are just getting bigger, but wherever you can help it, don't put more on your credit card than you can pay off at the end of the month. Again, I know I'm not telling you anything you don't already know here, but odds are you have a balance on your credit card. And I just want you to have all of the tools to be able to think through how much that's going to cost you in the long run. I also know that this practice isn't

feasible if you're already in credit card debt. And if that's you, there are a ton of great resolutions you can set for 2024 that will help you chip away toward becoming debt-free. And I link those resources in the show notes. But for anyone struggling with budgeting and carrying a credit card balance, one helpful habit I picked up when I was in that position was to set a hard budget for myself in cash and not even bring my credit card when I went out shopping or to dinner. When you swipe a credit card, you can spend money that you simply don't have. But when you're paying in cash, that's literally impossible. So it's always worked for me. Number three, invest regularly every month. Even if you have an airtight budget for 2024, you can probably find a little wiggle room in your budget to accommodate a monthly

investment. Again, you just need to find a number that's right for you. But I'm going to throw out $100 a month as a potential investing budget. That is $25 a week. You can break this down to the day if you want. This means that by the end of 2024, you'll have invested $1,200, which is a good chunk of change. And because of how the stock market grows at 8% historically, at the end of 2024, you'll have earned 108 bucks on your money. And we love that for you. And you might be thinking to yourself, I wish I didn't have to invest all of the money monthly. And instead, I was like Warren Buffett and had a gazillion dollars just laying around that I can invest all in once. Well, if you're thinking that I have some good news for you. Our homie Warren is investing essentially in the same way

that we're talking about. It's a legit investing strategy called dollar cost averaging. The method behind the madness is that the stock market moves up and down. We know this. And we also know that we want to buy low and sell high. But because the market is always moving around, we don't know where the low is and we don't know where the high is. We don't know if it's going to be higher or lower tomorrow or the best time to buy. Making consistent investments instead of one big investment all at once improves your chances of investing during a sweet spot. And here's the best part. If you keep the resolution going and you continue to put 100 bucks away in an investment account every single month with no end in sight, in 40 years you'll

have more than $313,000 in your brokerage account. I know I'm a nerd, but come on, isn't that really cool? In the last resolution, I mentioned how compound interest can hurt you, but compound interest can actually work for you when you invest, so make that the cornerstone of your 2024. Number four, face your fears. This one's for everyone. Find something in your money world that freaks you the F out, break it down into small baby steps, and take the whole year to tackle it. Full disclosure here, I was once super scared of buying treasury bills. It just seemed so complicated. And to be fair, it can be. Buying them is not a straightforward process. You need to

use a poorly designed government website. There's an auction. It's a whole thing. I would think about doing it and I would get so overwhelmed that I would put it off. And finally, I broke it down into baby steps, opening a Treasury Direct account, then funding it, then figuring out the auction schedule situation for Treasuries, setting a calendar reminder, and finally making the purchase. Once I'd done it, well, it was still kind of a pain, but it meant I was able to take advantage of the great returns on treasury bills that have been going on this year. And then later, and this is kind of funny, my big moment became pretty moot because I discovered that the app Public, where you can buy treasuries,

is a fraction of the time with literally zero stress and confusion. But still, I can say that I did tackle my fears. Maybe for you, that money move you're putting off is setting up a 529 savings plan for your kids or rolling over that 401k from the job that you quit four years ago. Identify your fear, break it down into steps, and set your deadlines.

Give yourself the entire year, and once you start making progress on your big task, you might be surprised with just how manageable it is and how quickly you get it finished. Number five, know by January. Okay, that last tip was all about breaking down your resolution and spreading it out over the year. And this final one is all about getting it done very quickly. Just rip off the New Year's resolution bandaid. One easy way to do that is no-buy January. I know that doesn't sound easy, but it's exactly what it sounds like. Make a plan

to buy nothing, nada, zippo, zilch for the entire month of January. Yes, of course, you can buy food and paper towels and stuff like that. Although if you do have a big emergency stash that you had from the pandemic, this might be a good time to eat through all of that pasta and finally use that random industrial roll of paper towels that you bought during the 2020 quarantine. So yes to buying groceries, but don't buy that random impulse hair mask that you saw on TikTok. I know that I often say that skipping your latte isn't going to get you that dream house, and it's true. One little treat, even every day, isn't going to break most people's banks. What we're after here with No Buy January is a hard reset.

Just like dry January can reset your tolerance for alcohol and change your relationship with your after-work drink, so too can No Buy January change the way you relate to impulse purchases and spending habits. While this resolution does require a lot of work for the first month of the year, you can basically coast on what you learn for the next 11. Because if you take know by January seriously, chances are by next December, you'll still be enjoying the benefits of reimagining your relationship with spending money for an entire month. And okay, if this is too extreme for you, instead of cutting out everything, just cut out one category that you tend to splurge on,

like ordering meals or taking an Uber or Lyft. And there you go, fam, five simple and totally reasonable New Year's resolutions to make 2024 the best year yet. They're not here to limit you, they're here to help you change the way you think about money and in the end, how much you have. For today's tip, you can take straight to the bank. If you're not planning on making any major purchase this year, contact each of your credit bureaus, that's Equifax, TransUnion, and Experian, and freeze your credit. This basically blocks scammers from opening any accounts in your name. So just set it up as an annual reminder on your phone. And then next New Year's, if you're planning on buying a car or another big purchase, you can always unfreeze your credit. Otherwise, leave it as is with thieves

locked out. Oh, and happiest birthday to one of our most loyal listeners, Ethan Feldman. I am not going to sing because nobody wants to hear that, but I will say that I am sending you all of the vibes for a year that is rich in every sense of the word. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and

TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.