CNN, December 28, 2017
New Year’s resolutions can take a lot of effort to put into action.
We’ve got a much easier approach.
Just stop doing these five financial things and you’ll have more savings, smarter spending habits and a secure identity in the next year.
1. Stop saving your leftovers
Saving shouldn’t be an afterthought. Instead, adopt a “pay yourself first” model, which is a battle tested way to increase your savings.
Rather than waiting to see what’s left at the end of the month (which tends to be, at best, paltry and arbitrary and, at worst, a guilty gut-punch of nothing) and putting that toward savings, set up an automatic transfer that will move the same amount of money out of your checking account to your savings account as soon as it lands each pay period.
How much should you set aside? ICYMI: you should be saving 10% to 20% of your take-home pay a year. But your first task is to get $1,000 into that savings account for your emergency fund.
Action plan: Decide on an amount you want to set aside each pay period. Go to your bank’s website to set up an automatic transfer to happen on pay day.
2. Stop using painless payments
But the farther away you get from the act of paying (which is painful) the more money you’re likely to spend, says Dan Ariely, a behavioral economist and co-author of “Dollars and Sense.”
“If it is an automatic deduction you don’t experience the annoyance in the same way and you’re less aware of the costs,” Ariely said.
Forcing yourself to pay in cash, or at least forcing yourself to re-enter your credit card number each time you purchase something online, keeps you in touch with the pain of paying and helps you remember that buying something now means not saving for later.
Action plan: Pay by cash or check, when possible. Do not save your credit card number on your computer, retailer’s websites or virtual wallets. Avoid one-click payment systems.
Read more here.
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