UPDATED POST FOR GOLDENGIRLFINANCE
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 the drugstore 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 interrupt a dinner party to proclaim, “My therapist thinks it’s because my father never came to any of my piano recitals.” Or grab the phone in a panic and shriek, “I need to call my shrink!” after a night of debauchery.
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.
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.
Similarly in personal finance, it’s important to do a little self-reflecting. Especially now, at the beginning of a new year and as we gather our financial paperwork for tax time, 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 2013…
1. Before setting impossible goals for 2013, be thoughtful and thorough. Review your tax paperwork and last year’s budget. Be painfully honest with yourself and ask, am I happy with the amount of money I made last year? Did I reach any of the financial goals I set for myself last year? How or why not? 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. Figure out your debt and make a plan to deal with it. Add up your total annual expenses plus any additional debt; what is the ratio of expenses to 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 2013 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. 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, even if that means putting $50 a week into your savings account.
4. Grow your money. If you have a savings account and an emergency fund, consider taking a chunk and investing in short-term CDs or mutual funds or ETFs. These can be low-risk options that can help you increase your savings instead of lingering in a low-interest savings account. Also, 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. Set a personal financial goal (that is also attainable) for 2013 and take the steps to get there. Do you want to increase savings by 20%? Do you want to get rid of all credit card debt? Are you saving for a new home? If that means taking an additional shift at work or getting a part-time job, do it. Or, 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.