Money matters usually rank among people's top New Year's resolutions and this year is no different. MarketWatch reported on one of the many resolution surveys in which "Get out of debt or save money" came in as the number one New Year's commitment. In fact, 90 percent of survey respondents had a money-related goal on their list, including: reduce spending, create and stick to a budget, seek additional sources of income, and discontinue using credit cards. However, nearly one-third of respondents believe they will break their resolutions by the end of January; three-fourths believe they will do so within three months.
Matt's View
One of the most effective ways to follow through on a goal is to tell someone else about it and invite him or her to ask you about your progress on a regular basis. Here are four of my money-related resolutions for the New Year (I'll keep you posted on my progress, but if I forget, please ask.)
Switch to an online budget program. I've been using a traditional software version of Quicken, but I don't like the fact that it ties me to one computer. I plan to take a closer look at Mint.com
, Geezeo.com
, Wesabe.com
, and Quicken's relatively new online version
. All are free and boast of their ability to track electronic transactions, but I'm looking for a tool that also provides an easy way to track the use of cash.
Start a vegetable garden. Okay, maybe "garden" is going a bit far, but I'd like to get our family in the habit of growing some of our own food. It should save a little money, and I think it will be an enjoyable family activity.
Begin composting. This isn't about stewarding money; it's about stewarding the earth. When I read that about 25 percent of what each of us throws away each day is biodegradable, it made me want to put less stuff in the trash.
Take more pictures and give them as gifts. One of my splurges from the past year was a digital SLR camera. In 2009, I plan to do a better job of keeping it with me to capture more of our visits with family and friends. And I plan to be on the lookout for good deals on picture frames so I can give pictures as gifts. A photograph is a timeless winner of a gift--meaningful and inexpensive.
What about you? What are some of your top resolutions for the New Year? Please drop me a line
and let me know.
Some of the most interesting (and odd!) research about money comes from behavioral economists and psychologists. As noted in a recent Economist article, one study found that diners tend to spend more in a restaurant named "Cafe 97" than one named "Cafe 17." Another study looked the behavior of people who carry a balance on their credit cards. In an experiment, some were given a statement in which no minimum required payment was specified, while others got statements with a clearly noted required minimum payment. Those who were not told how much was required tended to pay a higher amount.
Matt's View
The other way that minimum required payments work against you is that the required amount decreases slightly each month--that is, assuming you don't charge any more on your card. And it decreases so slightly that you hardly even notice. If you pay this declining minimum each month, you'll be in debt for approximately forever! One of the simplest steps you can take toward accelerating the payoff of your debts is to fix your payments on this month's minimum. If your minimum required payment is $25 this month, keep paying that amount even when the card company asks you for $24.10 or $23.35.
Here's an example of how beneficial it can be to fix your payments. Let's say you owe $1,800 on a card that charges an interest rate of 14 percent and that requires a minimum payment of 2.5 percent of the balance or $10, whichever is higher. If you pay the declining minimum required payment each month, it will take you 167 months to pay of the balance. By fixing your payment on this month's minimum required payment of $45 (2.5 percent of $1,800), you'll be out of debt in a mere 55 months.
And here's one other hint about avoiding debt. Stay away from restaurants with high numbers in their name.
How did you do on finding holiday gift deals this year? Can you beat this: 27 gifts for $90? As reported on TODAY
, that's just the latest in a long list of amazing money moves executed by Steve and Annette Economides, who have turned smart shopping into an extreme sport. The Arizona couple, along with their five children, lives well even though their average annual income over the past 26 years has been $44,000. They shop at discount stores and thrift shops, don't buy on credit, and by planning every meal around what's on sale at the grocery store, keep their monthly food tab to $350. Steve said their financial habits are simply an expression of their outlook that life and people are more important than stuff.
Matt's View
I've read lots of stories touting the benefits of frugality, but there was something about this story that I found especially inspiring. In part, it was the fact that frugality isn't the family's goal; frugality is simply a means to a good life lived within their income. In part, it was also seeing the kids' response. They don't come across as suffering or embarrassed at their parents' frugal ways; they come across as knowledgeable about money and excited about getting good deals on the things they need and want.
How do you feel about a person ahead of you in a store checkout line who is using coupons? Do you think to yourself, "Now there's a smart shopper"? Or do you think, "What a cheapskate"? The New York Times reported on a study in which people using low-value coupons (50 cents off on a $4 item, for example) were perceived as cheap by people further back in the line. And not only that, but the poor shopper immediately behind the coupon-user was perceived as cheap as well. How's that for a negative halo effect?
Matt's View
I have to believe that in our current economy this tide will soon turn--that coupon users will be seen as the wise ones.
Speaking of coupons, several readers pointed out an error in the last issue of Matt About Money. I described how you could get extra discounts on Restaurant.com coupons
and noted that you'd be able to get a $25 meal for $3. It turns out that participating restaurants require that you spend $35 or more in order to use a coupon. So, I should have said you can get a $35 meal for $13. The savings are still good--just not quite as good as I thought.
