Every year, it seems, getting in better physical and fiscal shape top the list of people's New Year's resolutions. The fact that those goals pop up every year is a good indication that people have a hard time following through on them. A recent article on Yahoo Finance reviewed the classic steps to achieving such goals such as reframing negative thoughts about our prospects for success with positive thoughts, breaking large goals into smaller ones, setting deadlines, and getting an accountability partner.
Matt's View
Each of the steps is important, but one holds the key to goal accomplishment: getting an accountability partner. Figuring out what we want and understanding what we need to do are relatively easy. It's doing the work that's the hard part. Do you have a financial accountability partner--someone who knows your financial goals and encourages you to stay on track? If not, finding one is one of the most important steps you can take toward accomplishing your goals in the New Year, whether those goals are physical or fiscal.
If you have a financial accountability partner, would you send me a note? I'm doing some additional writing on this topic and would like to hear your story. What information do you share with your accountability partner? Just your goals? Or do you share details about your savings and debts? What lessons have you learned about choosing and using an accountability partner? What's been the result? Please write to me by clicking here
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Little things can make a big difference. For example, on the men's pro golf tour this year, the difference in average score per round between the number one money earner (Tiger Woods) and the player ranked 150th (Chris Riley) was a mere 3.4 strokes. However, Woods earned $9.5 million more than Riley!
For us mere mortals who are more reliant on 401(k) plans and IRAs to fund our future than our golf scores, there's a similarly important number to manage: the fees attached to our retirement plans. A recent article in USA Today used the example of someone with 35 years before retirement and $25,000 in a 401(k) plan. With no further contributions, an average seven percent annual return, and fees that shave half a percentage point off the return, the balance would grow to $227,000 by retirement. Dial those fees up to one and a half percent, however, and the balance would total nearly $65,000 less.
Matt's View
Most of us probably spend more time comparing prices on different brands of toothpaste than comparing fees on different investment choices. But the fee comparisons would be far more profitable. A good place to start is to find out the expense ratio of any mutual fund you're considering. It's a good way to compare operating fees across different funds. Average ratios range from 0.25% for index funds to 1.5% for actively traded funds. Then use that information (the lower the ratio the better) to help you choose your funds. The difference between low- and high-fee funds may not be enough to give you Tiger Woods' lifestyle, but it'll go a long way toward keeping you out of the financial rough in retirement.
Magnetic Resonance Imaging (MRI) is normally used to diagnose injuries or diseases. However, the Wall Street Journal recently reported on the first-ever use of MRI technology to better understand brand recognition. When showing various logos to study participants hooked up to MRI machines, the logos of well-known brands generated more activity in the part of the brain associated with positive emotions than lesser-known brands.
Matt's View
The study simply confirmed what marketers have known for a long time: an important key to moving prospective buyers to action is making an emotional connection with their advertising. We can use the same approach in the pursuit of our financial goals. Want to build savings? Get a clear, compelling picture in your mind about the purpose of your savings--whether it's to buy a new house or help send your kids to college. With so many emotionally charged advertising messages coming our way every day, it's important that we view our goals with an even greater sense of excitement.
Have you ever "regifted?" You know, given something as a gift that someone had given to you? According to an article in the Detroit News, 40 percent of people admit to regifting. "Admit" seems to be the key word. Now there's a web site on the subject that offers advice for tactful regifting (is that an oxymoron?). Among the suggestions: Always rewrap the gift; only give items that are new and in their original packaging; and, perhaps most importantly, know who gave you the gift in the first place so you don't give it back to them!
Matt's View
A favorite Christmas tradition in my wife's family is an annual white elephant gift exchange. After all of the wrapped presents are placed in the middle of the room, people draw numbers to see who gets to pick first. It's a fun way to do a bit of honest regifting before the real gifts are given on Christmas morning.
