The first post of 2009 — How to dominate your personal finances
January 07th, 2009 - 43 Comments
This year is going to be awesome. I can tell you this for sure, because this year we’re going to:
- Learn how to automate your money — one of the most important parts of making sure you hit your money goals consistently
- Have crystal-clear answers for the most common personal-finance questions: “Should I buy or rent?” “Should I pay off my debt or invest?” “How do I invest?” “How do I save more money each month?” — and be able to explain them to others.
- Learn how to avoid crackpot prognosticators that try to predict which way oil, stocks, and real estate prices will go…and nearly always get it wrong.
- Learn more frugality tips that really work, as well as tactical tips for easier investing, negotiating, and tracking your money
I know first posts of the year are supposed to cover resolutions, but I think these three posts do a better job than I could:
Jared Goralnick points out that one of the best things you can do is know what you want.
And the New York Times illustrates how almost all New Year’s resolutions fail
The truth is, I don’t believe in New Year’s resolutions. If you have to be really honest with yourself, did you actually achieve last year’s resolutions? Do we even remember what they were?
It’s time to get brutally honest
Few of us are honest with ourselves. I wrote about in The $28,000 Question: Why Are We All Hypocrites About Our Wedding?, where I pointed out how we all love to say “My wedding will be simple, but it never really is. If we acknowledged that our wedding would be over $20,000, we could start saving for it. And when I pointed out how much you need to save for a wedding, people’s jaws dropped.
Let’s get real.
When 90%+ of people consistently get the same result (failure for New Year’s resolutions), I start to believe that the real answer is, “forget it and acknowledge the truth.”
For example, when I constantly tell myself I’m going to take work home when I go to visit my parents — yet I’ve never actually done any work there — it’s time to be honest and acknowledge that I’m never going to work while hanging out with my parents. Now, I leave my work at home and enjoy my vacation.
When you constantly berate yourself for not keeping a budget, even though everyone says you should, it’s time to forget it and find something that works. (I’ll show you how in a future post.)
Consistency, not magical moments
Success is not about some special moment in time, like the first of the year. If you haven’t been able to do something all year, there’s very little chance that a New Year’s resolution is going to change that.
This year, like every year, is about sensible changes. They may not be as sexy as announcing to your friends that you have a new resolution to lose 50lbs or you’re going to cut your spending by 50% in 1 month, but systematic changes work. Make your money flow automatic. Understand where your money should be going (debt vs. investing?). Figure out how to run the numbers so you can see if one decision is better than another.
It’s not as sexy as “15 stocks you must buy!” or “18 banks with better interest rates than yours,” but it actually works. I’ve written about why sensible goals impress your friends, get you girls, and help you lose weight. As I always say, would you rather be sexy or rich?
I need your help, though. You need to decide what you want to accomplish this year. If you’re looking for quick tips that will be silver bullets, this isn’t the right blog for you. If you want someone to help you save money using extreme frugality tips to save an extra few bucks here and there, I’m not your guy (there are better frugality bloggers out there). And if you have no idea why you’re earning, spending, saving, investing, and automating your money — or if it’s just to keep up with your friends — this is definitely not the site for you. I need you to decide why you want to be rich — and what rich means to you. Do you want to pay off your debt this year? Or be investing $500/month by June? Or save up for a vacation to China?
Once you know where you want to get, you can take my tips and apply them to your life. Everything falls into place once you’re saving and spending towards something.
I’ll help with the best tips I can write for you. For an example of some of my favorite tips, please check out my Save $1,000 in 30 Days Challenge (scroll down for the tips). I spent over 150 hours writing those tips, and they saved people hundreds of thousands of dollars. Expect more highly tactical tips like that, but directed towards topics like investing, negotiating, and more.
Later this week, I’ll post my 30th tip of the 30 Day Challenge.
Then we’ll get on to the new stuff.
It’s going to be a great year.
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