Financial New Year’s Resolutions

New year. New financial goals.

What are your financial goals this year? Find out why it’s important to include your bank account in your New Year’s resolutions.

Podcast transcript

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PETE: This is How Not to Move Back in With Your Parents here on the IU MoneySmarts Radio Network. I, of course, am Pete the Planner, joined as always by my good buddy Alex. Alex, hello.

ALEX: Hello, welcome back.

PETE: Second semester, we didn’t get cancelled. What was the best one-hit wonder television season that got cancelled immediately? Did you ever see that show Flash Forward on ABC a few years ago?

ALEX: Not at all.

PETE: So, it’s this whole thing, time flash forward and then they ended it and it got cancelled. We did not get cancelled. So here’s where we got this season on How Not to Move Back in With Your Parents, lots of great things. Today we’re focusing on New Year’s resolutions. Are they healthy, are they unhealthy? And from a financial perspective can they get you in trouble? You’re a Yonker, young man. Where do you stand on New Year’s resolutions? Do they have an impact on your life? With January 1 rolling around, do you care either way?

ALEX: Not really. I’ve been a guy that has made New Year’s resolutions. It hasn’t been anything too serious. Like maybe I wanna pick up this new hobby or excel in sports in some way.

PETE: Learn Japanese.

ALEX: Yeah, that’s interesting.

PETE: I know it would be interesting.

ALEX: It would be tough, but it would be too much for me.

PETE: Yeah, especially when you can only do it in the first 15 days. Because the reality is most New Year’s resolutions end within the first couple weeks. Of course, there’s all the stories about people saying, I wanna get in shape and then they get a gym membership. And then 30 days later, they don’t go to the gym for the rest of the year.

ALEX: And that’s the funny thing about everyone who works out consistently, they hate this time of year cuz it just gets packed for like two weeks.

PETE: Yeah, a New Year’s resolution is basically a diet. It’s not a lifestyle change. And I think financially, as a college student, as you say. You know what? I do wanna be better next year. I think one of the biggest traps you can get into is to identify that there’s a problem, and then choose an arbitrary date to change the problem. Because, Alex, if you realize there’s a problem and then say well, I’m gonna wait to change the problem, you’re making the problem worse.

ALEX: Yeah, you’re procrastinating on it, which is something you shouldn’t do, especially with money, because if you procrastinate to that date, then it’s gonna be gone and you lose.

PETE: So let’s do this. Let’s give you four things that maybe you can focus on. Let’s not worry about procrastination but instead, maybe, let’s talk about goal setting as it relates to New Year’s resolutions. Number one, and we’ll start here, Alex, reducing a problem spending area. You told me the other day that your problem spending area continues to be food. And I think most college students are in that same boat.

ALEX: Definitely.

PETE: So a good goal is gonna have a couple of things. And a good New Year’s resolution which we’re doing a non-resolution resolution. A non-resolute resolution, as we’ll call it. A good goal has a time date, a time stamp on it, and also has a dollar value associated with it. So what I would say a good New Year’s resolution to start as it relates to reducing spending is, I will spend $30 a week less or $20 a week less on dining out every week in the next 30 days. Is that a reasonable one for you? What would you like to spend less?

ALEX: And something to keep in mind here is this also means you need to be keeping track of how much you are spending and not just doing balance spending as we discussed last semester. But it is definitely something that is a huge issue with food. It’s tougher for me, and I know for a lot of people, because at least in the fraternity house, a lot of Greek houses don’t have meals on weekends. So you’re forced to go outside and do something else. And we might not be more inclined to go get groceries, as opposed to someone who always does that consistently. But I would say a monthly goal is definitely a good place to start. If you wanna get more specific, you could do weekly. But monthly is definitely a good go to for the school year.

PETE: All right, number two goal that you could have in the next 30 days as a replacement New Year’s resolution is going to be to save money. Now, Alex, we’ve discussed before and we will discuss again how, frankly, saving money as a college student is unrealistic and it goes beyond just being gravy. I don’t think there’s any reasonable expectation by any financial experts in the world, including myself, that college students actually accumulate any money. But what they can do is over breaks, over the summer. And I know specifically what you did over a holiday break is you worked a lot. You still got to see your family. You still got to see your lady friend. But ultimately, you worked a lot, and you saved a lot of money.

ALEX: Right, I also have to set a goal with that in mind. So I had a couple of different goals when I worked over holiday break. First of all, obviously a more college type goal, I wanna save up to go on spring break.

PETE: Okay.

ALEX: Because I haven’t been able to go on spring break at all in college.

PETE: So you’re going on spring break this year?

ALEX: Yes.

PETE: Here’s the good news, later on in the season of How Not to Move Back in With Your Parents, we’re gonna be talking about spring break spending. And we’re gonna be talking about your spring break spending, so bring the numbers.

ALEX: That will be a fun one.

PETE: Okay, what’s your other goal that you had in going back to work over the holidays?

ALEX: The other goal is a little bit better one in terms of the long term. But my goal is to go abroad after I graduate, since I-

ALL: [CROSSTALK]

PETE: What’s her name? No, I’m sorry.

ALEX: [LAUGH]

PETE: To go abroad to travel, yes.

ALEX: Right, right. Man, that joke just is so old that it’s funny.

PETE: It’s so old, but it’s great.

ALEX: But I gotta tell you.

PETE: It’s great.

ALEX: It is.

PETE: It’s a no fail.

ALEX: Yeah.

PETE: Okay, so, you’re saving for that?

ALEX: Right, so I have a separate savings account that I’ve been working on that for actually a couple of years now. So I’m splitting up the earnings I have between the spending for spring break, things like that, and saving it. So at this point for me, it’s deciding what ratio I use for those, too.

PETE: Another good goal heading in to 2014, or any new period of time, is to also to reduce a particular debt level. Now it’s unlikely, if you’ve taken out student loans that you’re gonna begin the repayment of those student loans while you’re still in school. Again our goal here is to not only give you technically sound advice but really practical advice. Because the harsh reality is the technical advice sometimes just doesn’t work. You need very practical solutions. So Alex, I would tell people that if you focus on debt repayment as your first 30 day goal coming out of the box. It probably should be a family loan. If you have a family loan, maybe work on repaying that. Certainly getting your credit card balances down, and always start with the lowest balance that you have. I think a lot of time we’re tricked into, well I have, I’ve got a $1500 credit card bill that’s getting out of control and I have a $200 store card at the Best Buy. And people get scared so they attack the $1500 card first. The reality is you should really attack that smaller debt first and just get it out of the way and stop using the card.

ALEX: And that’s something that’s very interesting because I personally don’t have a credit card. I don’t have any other debts other than the student loans I will be paying back once I get out of school. But a lot of kids that I know do have credit cards and it can get them in a lot of trouble if they don’t think about it and pay those bills on time as well.

PETE: And the fourth goal, fourth potential goal heading into the New Year, it’s really again, take the time, take 20 minutes, man, and just put together a budget. It’s really not that bad. Grab a piece of paper, grab a writing utensil. If you don’t have one, just stick your finger with a pin and write it in blood, right?

ALEX: Yeah, I mean. Yeah, practical, but not maybe what you’re trying to do.

PETE: So just write down, this is what I spend on rent if you’re renting. This is utilities, this is food, and just have some awareness around it. Really what you’re spending. Again budget means so many things. It means what you’d like to spend, what you did spend, and what you’re trying to spend. And so it’s all those things, and I think those four goals again. So let’s recap. Reduce spending in a particular area, certainly save money if possible during breaks and summer by working. Number three, reduce debt on a particular area. Number four, just put together a budget. I think it’s a good place to start. That’s this week’s how not to move back in with your parents. For more information, please go to moneysmarts.iu.edu. And we look forward to seeing you next time here on How Not to Move Back in With Your Parents.

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