By Elizabeth MacBride
Looking ahead
The worst kind of New Year hangover is the one you can't cure with
hair-of-the-dog: It's the financial hangover. You threw caution to the winds
(or your credit cards at the sales assistants) and now you're staring at the
bills.
If that sinking feeling spurs you to improve your financial position in 2014,
then your 2013 binges will have served a good purpose.
Adopting better financial habits starts with changing the way you think. Step
away from instant gratification, and get in the habit of weighing all
finance-related decisions. That means considering the pros and cons of each
choice in terms of money and happiness, prioritising and then weighing the
present against the future.
In 2014, look to change not only your habits, but your mindset. Here are a
handful of tools and ideas to help you on the road to a happier, financially
healthier new year. (Photo credit: Thinkstock)
Organise
CHANGE YOUR HABITS: As you create your new financial persona, think of your
myriad documents as the raw material. Step one is to sort through them. If
you've been struggling with the same all-in-one photocopier/scanner/printer for
several years, you might not have realised that mobile scanners have taken a
big leap forward. From US retailers for $100 to $200, you can buy a scanner the
size of a fat magic wand and if you use it, it may have a similar effect on
your finances.
Machines from companies such as Japan-based Brother work either by scanning
documents you feed into them, or by scanning as you wave them over documents.
Bestbuy.com ships portable scanners internationally. To organise non-scanned
documents, consider erasable binder clips, like those from PileSmart, available
in a set for $4 at Amazon, or erasable magnetic labels, available for under $10
at The Container Store. Both retailers ship internationally.
"Set aside four blocks of six hours (to organise your documents)," suggested
Vicki Norris, an Oregon-based organising expert.
CHANGE YOUR MINDSET: Services such as Mint.com help organise your spending by
giving you a bird's eye view of all your accounts, including your bank accounts
and credit cards. Mint links users to more than 20,000 banks, credit cards,
loan and investment accounts in the United States and Canada. A spokeswoman
said by email that Mint has helped users create more than 6 million goals and
save $40 billion. If you want to go one step further, services from online
companies such as California-based MoneyStream will organise all of your
accounts and help you pay bills. (Photo: Brother DS-920dw mobile scanner)
Save
CHANGE YOUR HABITS: Several new sites offer ways to earn cash back on
purchases, including BeFrugal.com, Mr.Rebates and Shopathome.com. After you've
earned a certain amount, sites will send you a cheque or drop the earnings into
your account.
"It's literally free money," said Roger Ma, 31, a New York-based digital media
professional and personal finance blogger who uses many of them. "It's one easy
step you can take when you're doing online shopping." The sites mainly offer
rebates on purchases made from big US-based retailers, which means shipping
costs are higher if you live elsewhere. The average shopper outside the US
spends $300 per order, compared with $100 for US-based shoppers, said Jon Lal,
45, founder of Massachussetts-based Befrugal.com. A quarter of the site's
shopping is by people outside the US. (Photo credit: Thinkstock)
CHANGE YOUR MINDSET: Befrugal.com and other apps offer financial tools that
allow you to weigh your spending and savings decisions. Ma, for instance, used
a "drive or fly" tool to help him decide whether to take a plane or drive to a
wedding. The car won: it was cheaper by $300 and equal on time.
The Center for Retirement Research at Boston University offers a [free
interactive program]( : http://crr.bc.edu/special-projects/interactive-tools/
target-your-retirement/) to help US investors decide how much they need to save
for retirement.. The Australian government offers similar tools .
The surprising conclusion from many financial tools is how much you can benefit
from saving. The tools, however, can't account for your pleasure, or even
trickier, the preferences of the people around you. Sometimes you need a good
old-fashioned conversation.
Teach
Part of turning over a new financial leaf means helping your children learn
that they reap what they sow: Good financial habits instilled early will pay
off for both you and them. So how do you teach them?
CHANGE YOUR HABITS: Discussing money in the language your children speak play
will make a difference. Investor Warren Buffet has distilled his financial
wisdom into a series of learning tools and games called The Secret Millionaires
Club. Some are free, but for $20, you can download a business-in-a-box (what
else a lemonade stand) from Amazon.com, which ships internationally. A DVD
with episodes of an animated series that features financial and entrepreneurial
lessons is about $13. If your approach is a little more old-school, you
probably can't beat Hasbro's board game Monopoly, available in 111 countries,
in 43 languages. The most coveted property space in the US English-language
version is Boardwalk; in the UK its Mayfair while in Spain, it is named Paseo
del Prado and in France, Rue de la Paix."
"What remains constant (in all versions of the classic game) is that you are
buying, selling, paying bills, and even paying taxes," wrote New York
City-based Laurie Schacht also known as the Toy Insider Mom, in an email to BBC
Capital. The latest version is Empire, available at Amazon. It allows kids to
buy and sell brands including Xbox, Coca-Cola and Samsung.
CHANGE YOUR MINDSET: Parents often reach for something to buy when they want to
impart a lesson to their children, but the most important way to instruct your
children is by example, said John Bogle, founder of Vanguard Group.
If you have good financial habits and show kids you are able to delay
gratification, they will notice. If you need a little help in that department
yourself, you can always resort to a kitchen safe. For $45, you can buy a safe,
set the timer, and lock your credit cards away. (Photo credit: Thinkstock)
Invest
CHANGE YOUR HABITS: Getting your investments on autopilot is probably easier
than you think, thanks to new web-based investing services. In the UK,
London-based company Nutmeg, for one, offers low-cost, basic investment
services. It has 20,000 users around the world so far and offers 10 basic
investment strategies. Services typically ask you to pick a risk level and time
frame, and set a schedule of regular deposits. California-based Wealthfront and
New York-based Betterment offer similar services for US-based investors.
CHANGE YOUR MINDSET: If you consider your investments as products like any
other, you ll make better decisions about how much to pay for them. The first
step is figuring how much you are shelling-out that's tougher than you think,
because many fees are hidden in investment funds' fine print. "People are
surprised to find they're paying any fee at all," said Bo Lu, chief executive
officer of California-based FutureAdvisor. "If they didn't swipe a credit card,
they don't know they're paying." FutureAdvisor, available in the US, offers
investment management services and a free service that will survey your
investments and calculate how much you are paying in investment fees.
Households that invest in mutual funds are probably paying more than $1,000 a
year in these fees. This money is skimmed from the top of your returns and over
the life of your investments, can make a huge difference. (Photo credit:
Thinkstock)
Learn
CHANGE YOUR HABITS: You probably already have a small pile of personal finance
books sitting in your house. Open them. Managing your money is like any skill.
You need to brush up once in a while. A few US classics are A Random Walk Down
Wall Street, by Princeton University economist Burt Malkiel, and The
Intelligent Investor, by Benjamin Graham, Warren Buffett and Jason Zweig. A
newer personal finance book that is garnering kudos is Guy Fraser-Sampson's No
Fear Finance.
CHANGE YOUR MINDSET: Making sure your new habits stick probably means
understanding why you developed the old, bad ones. Consider Nudge: Improving
Decisions About Health, Wealth, and Happiness by Richard Thaler and Cass
Sunstein to understand more about the emerging field of behavioural economics.