I am your typical New Yorker. Like many of my fellow city-men and -women, I know how to hail a taxi without getting side-swiped. On escalators, I stand on the right and walk on the left. I let people get off the train before getting on. I give tourists succinct, exact directions–even offer restaurant recommendations– but don’t linger for small-talk.
However, as a New Yorker, I am an enigma. That’s because I do not have a therapist.
It seems that every friend, colleague, acquaintance or person behind me in line at Duane Reade has at least one therapist and sees that person pretty regularly. It’s not uncommon for a friend to start a conversation with, “Dr. Tony says my journaling is really helping me work through my issues.” Or, “My therapist thinks it’s because my father never came to any of my piano recitals.” Or “My shrink is thrilled that Xanax is helping me manage my panic attacks!”
I know that going to therapy is good for one’s mental health and can actually help people learn to deal with anxiety, stress or depression–I think that is great!
However, as a woman of Middle Eastern descent, I prefer to spend my therapy money on more pressing matters–specifically on laser hair removal, electrolysis and waxing. No therapist will help me get over the memory of me as a little girl in the fourth grade, sitting in my reading circle surrounded by my classmates. Compared to the cute, skinny blond girls in their bobby socks and tennis skirts, I was a thick hairy rectangle that smelled like hummus, sporting tube socks up to my thighs to cover up my hairy legs. That’s a memory that is burned into my psyche and for that reason, I prefer to get rid of the evil that caused my anxiety, rather than go sit with someone and have a chat about it.
But everyone needs therapy–or even self-reflection–in order to take responsibility and move forward. Over the years, I’ve learned how to deal with some of my misadventures and bad habits, and while I’m not a professional, I think taking responsibility for one’s actions could be a great first step.
Similarly in personal finance, it’s important to do a little self-reflecting. Especially around tax time–when we see in black and white how much (or little) we’ve earned the past year, what our annual living expenses came out to, how much money we spend annually on food, entertainment, travel, and how much debt we have–it’s helpful to examine our finances, be honest about our spending and saving habits, and set some new goals to change bad behavior.
Here are some tips for planning a more financially rewarding 2012:
1. Before you file everything away into oblivion, review your 2011 tax return and 2011 budget. Be painfully honest with yourself and ask, am I happy with the amount of money I made last year? Am I OK with the amount of money I spent on food and entertainment? By actively taking the first step–looking honesty and critically at last year’s finances and identifying your satisfaction level with it–you can begin to set the right goals for next year.
2. Add up your total annual expenses plus any additional debt. What is the ratio of expenses to income? Do your expenses and debt (minus mortgage) surpass your income? Were you able to manage debt and also save last year? If not, review your spending/budget from last year and find three things you can cut out in order to reduce spending, manage debt and/or save. Allocate the savings to a specific debt or to your savings in order to reach a particular goal. Be specific.
3. Don’t have a 2012 budget yet? SET ONE UP NOW! Use Mint.com to set up a budget online, create an excel spreadsheet to track expenses or just write it down old-school. Find a way to track your spending and then do it.
4. Make sure you have the basics covered. Manage debt by consolidating into a low-interest rate credit card and make sure you are paying more than the monthly minimum if you can. Budget and save up for a six-month emergency cushion. Make sure you are contributing to your company’s 401(k) and if your company doesn’t offer one, set up an IRA or a Roth.
5. Grow your money. If you have a savings account, consider taking a chunk and investing in short-term CDs or bond funds. These can be low-risk options that can help you increase your savings instead of lingering in a low-interest savings account.
6. Set a personal financial goal (that is also attainable) for 2012 and take the steps to get there. Do you want to increase savings by 20%? What are the steps to go about this? Do you want to get rid of all credit card debt? If that means taking an additional shift at work or getting a part-time job, do it. Are you ready to invest $15,000? Check out some of the top online brokerage sites like Fidelity, Scottrade, or Etrade that also offer research and investing tools so you can do it yourself.
And if you’re ready to seek professional help, visit FPAnet.org to find an advisor in your area or NAPFA.org for fee-only advisors. Like a therapist, a financial advisor can help you identify bad habits, set priorities and help you reach your goals. But they probably can’t help resolve any lingering daddy issues.