Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Your Money: Ditch the Resolution - Do a year-end review instead

Stock MarketsJan 03, 2020 07:22PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. U.S. one hundred dollar notes are seen in this picture illustration taken in Seoul

By Chris Taylor

NEW YORK(Reuters) - It is hardly a secret that people rarely stick to New Year's resolutions - only about 8% of people actually make it to the finish line with their goals, according to studies from the University of Scranton, in Pennsylvania.

So here is a better idea for your financial life: Before you look forward, look backward.

A year-end spending review is a far superior way to revamp your financial life. Instead of gauzy, improbable thinking about what you might do, you face the cold, hard truth about what you actually did.

“We can only manage what we measure,” said Sarah Newcomb, director of behavioral science at fund research firm Morningstar. “If you're not even measuring your own spending, then basically you're just flying blind.”

This is especially true for the holiday season, when money seems to exit our wallets at hyperspeed. Average holiday spending on gifts and travel was slated to exceed $1,000 apiece for 2019, according to the National Retail Federation. In fact, among those who took out holiday debt in 2018, 35% of us were still trying to pay it off this past fall, according to personal finance site NerdWallet.com.

“Use a big event like the end of the year as a catalyst to do something you should be doing on a regular basis," said Dan Egan, director of behavioral finance and investing at Betterment.com.

If you have not been tracking your dollars, it can seem a daunting task. A few ideas on how to figure out where all that money went in 2019 – and how to do better in 2020:

* Open that annual credit-card statement

In the New Year, credit-card companies send out roundups of everything you have purchased in 2019. Typically, you might just ignore it. Don't.

For one thing, the documents are useful for tax planning, since purchases are often divided into spending categories that can help identify deductions. They are also excellent for shock value, to force yourself to see how your cash was deployed.

If an entire year of spending is too overwhelming to digest, break that survey period into something smaller, like two months, advised Egan.

You can also focus on specific pain points, like pulling up your Amazon (NASDAQ:AMZN) purchase history for 2019. Shocked yet?

“Take an honest look at what your life is costing you,” Newcomb said. “If some of those costs are frivolous and are purchases you regret, that is a valuable thing to take away.”

* Put fintech apps to work

A typical excuse for those who do not keep track of spending: It is too complicated and confusing. But with all the fintech apps now available, that excuse does not really wash.

“We encourage our clients to check their ‘You Need A Budget’ app every morning over a cup of coffee,” said Brenna Baucum, a financial planner in Salem, Oregon. “It takes only one or two minutes to sort their latest transactions. Then, after 30 days, they have some handle on where their money goes. Most often, the results shock them.”

Mint.com is a popular app and one game-changer, according to financial planner Salim Boutagy of Westport, Connecticut, is its "Trends” section, where you can see how your spending has shifted over the last few months or years.

* Calculate the unknown

In performing an annual spending review, one thing will probably jump out at you: The sheer volume of expenses that were totally unplanned and unforeseen.

“We’re all pretty good at estimating common expenses like electricity and phone and internet access,” said Morningstar's Newcomb. “But we are very bad at predicting the size and frequency of exceptions.”

That might mean car repair, or home improvements, or medical bills, or last-minute vacations. When you see how much of 2019’s spending was a total surprise, then you can build a similar buffer into next year’s budget.

Once you have done your spending X-ray for 2019, it is time to rework what Betterment’s Egan calls your “Top-Down Budgeting.” That means setting broad guidelines – like committing to saving a specific amount every month.

“The point is not to be as austere as possible and deprive yourself of all joy,” Egan said. “The point is to get to a right balance.”

Your Money: Ditch the Resolution - Do a year-end review instead
 

Related Articles

Bitcoin falls 8.4% to $49,228.82
Bitcoin falls 8.4% to $49,228.82 By Reuters - Dec 04, 2021

(Reuters) - Bitcoin dropped 8.4% to $49,228.82 at 20:01 GMT on Saturday, losing $4,514.87 from its previous close. Bitcoin, the world's biggest and best-known cryptocurrency, is...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email