Now that the New Year is underway, it's time to stick to those resolutions you promised to keep. And if you're like the many Americans who made resolutions of the financial sort, now is the time to develop a realistic game plan.
According to Fidelity Investments' fifth annual New Year Financial Resolutions Study*, a record number of Americans made financial resolutions in 2013. More than half (54 percent) of us resolved to save more, spend less and improve our financial habits, up from 46 percent last year and 35 percent in 2009.
Of course, resolutions are easier to make than keep, and old habits tend to die hard. But there are actions we can all take over the next eleven months to help lay a foundation for long-term financial wellbeing, and strengthen our resolve incrementally over time.
The shift to thrift
So what are Americans' top financial priorities?
According to Fidelity's study, more than half (54 percent) of us listed "saving more money" as our top resolution. "Paying off debt" was second at 24 percent, followed by "spending less money" at 19 percent. This shift toward thrift comes as no surprise. It is a continuation of a trend that started among American consumers following the economic recession of 2008-09. Over the past year, the U.S. personal savings rate grew to 4.9 percent, up from 2.9 percent in 2007**.
Equally interesting, consumers are now saving for short-term expenses (e.g., vacation, major purchases and emergency funds) as well as long-term priorities (e.g., retirement, college funding). While long-term planning still prevails (53 percent vs. 39 percent), the gap is shrinking, which suggests Americans are better able to plan and save for major discretionary purchases than they were several years ago.
This is cause for celebration, since establishing a balance between long and short-term planning is important and keeps us on track. To maintain the balance, it can be helpful to break goals down into month-by-month steps and monitor progress throughout the year. Survey respondents cited this as one of the most effective ways to achieve financial resolutions.
For best results, begin the planning process right away. Here is a sample month-by-month breakdown to get you started:
- This Month (January) - Identify new sources of savings. The most important thing you can do to achieve both short and long-term goals is to create a budget. Begin by pinpointing your essential and discretionary monthly expenses and then compare them to your income. Review this information and see if you can cut costs, pay down debt or save more. If you haven't already done so, create a liquid emergency fund of at least three to six months' salary to cover expenses in a pinch.
- February - Focus on retirement. Make sure you are saving as much as possible -- at least enough to take advantage of any matching contributions offered by your savings plan at work. Also take time to check out your portfolio's asset allocation to make sure you have the right mix of assets to meet your goals. Younger investors should pay close attention to whether their portfolio is too conservatively invested, since this can limit long-term growth potential.
- March - Organize your tax documents. Now is the time to gather up all your paperwork, like W-2 forms and receipts, and start preparing your 2013 taxes.
- April - Consider opening/funding an IRA. Making tax-smart investment decisions doesn't have to end when the new year begins. Contributions to an IRA can be made until April 15, and may potentially reduce your 2013 taxable income dollar for dollar, if certain requirements are met. The IRA contribution limit for 2013 and 2014 is 5,500; 6,500 for those age 50 and older. Also, if you get a tax refund, consider using some or all of that windfall to fund an IRA.
- May - Revisit college savings. If you have children, now might be a good time to ramp up your college savings. Consider a 529 college savings plan, sponsored by a state or state agency. Your savings grow tax-deferred, and you can withdraw the money federal income tax free, as long as you spend it on qualified higher education expenses.
- June - Update beneficiaries. Because you spend a lifetime building your savings, it's important to carefully consider who will inherit your assets. Review beneficiary designations on retirement and non-retirement accounts, as well as assets like your home and bank accounts. Many life events (e.g., death, divorce and/or the birth of a child) may impact your current financial plan.
- July - Check your account mix. Summer is a good halfway checkpoint to review the budget you made in January. It's also a good time to re-examine your asset allocation to make sure your investment mix still makes sense. If possible, consider boosting your contribution rate to your IRA or workplace savings plan.
- August - Pay down credit card debt. If you have credit card debt, consider paying it down now. The interest you pay every month on credit card balances can keep you from getting ahead.
- September - Consider consolidating your accounts. Combining several accounts under one roof tends to allow for more control over asset allocation and diversification. Having a holistic view of your overall financial picture can potentially lead to lower fees and enhanced levels of service.
- October - Start year-end tax planning. The smart investing moves you make now may help reduce next year's tax burden. Consider increasing contributions to tax-advantaged accounts (if possible) and investigate education credits, energy efficiency credits and other forms of tax savings. Calculate investment gains/losses and weigh the benefits of selling stocks as a tax-loss harvesting strategy.
- November - Review health and workplace benefits. Most companies offer open enrollment for benefits during November. Perhaps you've changed jobs, gotten married or welcomed a new baby into the family. If so, review your coverage and benefits to see if they still meet your needs. If available, weigh the comparative advantages of traditional and high-deductible health insurance plans (HDHP) and consider contributing to a healthcare savings account (HSA).
- December - Review the year-end tax plan you started in October. December is a good time to look at the year in review and decide where you may want to make changes on an ongoing basis. It's also a good time to look for opportunities to make charitable donations, which can potentially lower your tax bill in addition to helping others. Year-end is also the deadline to convert traditional IRA assets to a Roth, if appropriate. For retirees, December 31 is the deadline to take mandatory required distributions (MRDs).
While some steps may be easier to implement than others, your decision to develop a proactive plan and monitor progress throughout the year will help you keep your resolutions in 2014, and beyond. In the process, you'll create new, constructive financial habits that put you on the path toward long-term financial security.
Kathy Murphy is president of Personal Investing, a Fidelity Investments company. She oversees as business with more than $1 trillion in assets under administration, more than 13.5 million customer accounts and more than 10,000 employees.
* The Fidelity Investments fifth annual New Year Financial Resolutions Study is a national telephone survey of 2,027 adults, conducted from November 7-11, 2013 by ORC International.
**U.S. Department of Commerce, Bureau of Economic Analysis
Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.
Restaurant.com sells $25 gift certificates for $10 or $50 gift certificates for $20. The site also has sales throughout the year, and I've snagged $25 gift certificates for $5. I keep a stack of these things in my wallet at all times. Most places have a minimum purchase requirement (from $35 and up) but you can generally use the gift certificates any time. But there are drawbacks: They're for dine-in only, they're nonrefundable, and they can only be redeemed once per month per restaurant. Still, the site has become so popular that you can double dip - buying Restaurant.com certificates through an airline's shopping portal in order to earn frequent flier miles, for instance.
If you're not already using Groupon and LivingSocial, start now. Both sites post daily deals that will give you 50 to 90 percent off at different restaurants. You'll have to act quickly, but you'll save a bunch. I just got a dozen cake pops (regularly $17) for $8 through Groupon. If you don't want to spend hours sifting through all the offers, Money Talks News deals diva Karla Bowsher has culled the very best on our deals page.
If you have a smartphone, some social networking apps will get you free stuff and discounts. Last weekend, I got free guacamole and a free flan for checking into the restaurant on Yelp. Here are a few apps that score you deals: Yelp Check-ins - After you check in, mention Yelp to your server to get the goods. Foursquare - Many places offer discounts and buy-one-get-one offers to people who check in. SCVNGR - Every time you check in, you accumulate points. You can redeem your points for a discount on your bill or a free item depending on the restaurant.
Every restaurant in town knows when my birthday is. Last year, I got three half-price meals, six free desserts, two free entrees, and about a dozen free cocktails - and all I had to do was sign up for a birthday mailing list and turn a year older. Many restaurants have a birthday or anniversary club. Signing up is free and they'll send you a coupon around the date. Ask your server how to sign up - and even if they don't have a mailing list, he'll tell you what you can get for free or cheap on your special occasion. There's even a site devoted to listing restaurants where you can eat free on your birthday: eatfreeonyourbirthday.com
Social media-savvy restaurants post special deals on Twitter. Some even post code words. If you tell your server the code word, you'll get a discount or a freebie. Last month, I got a free dessert for saying "Free Sean Payton" to my server. (I live in New Orleans, and the code words referred to our NFL coach who has been suspended by the league.) To find a restaurant's Twitter info, visit its website and look for the "Follow Us" links. One should be for Twitter. Another should be for Facebook. Speaking of which...
Here at Money Talks News, we take surveys, hold contests, and give out freebies on our Facebook page as a way to keep in touch with you. Many restaurants do the same thing. By "liking" the restaurant page, you'll get access to special deals not mentioned anywhere else.
I've made it a habit to open a few apps before I walk into a restaurant. There are several free apps that post deals to local and chain restaurants. Most places will apply the discount to your bill if you show them the app - no need to print the coupon. Here are a few apps worth downloading: Dining Deals LocalEats The Valpak App
Many restaurants in my area extend their lunch hours until late afternoon. By eating dinner early, I get the lunch prices, which are often 25 to 50 percent cheaper than the dinner prices for the same entrees. Before you try somewhere new, visit the restaurant's website and see if they have a lunch or early bird special.
It's uncommon, but some restaurants let you bring your own beer or wine, which is usually cheaper than the cost of paying per glass. Before you go, call ahead and ask if the establishment is BYOB. If they're not, skip the cocktail and have one somewhere else. Some places will charge a "corkage fee" if you bring your own wine, but even at $10 per bottle, it's still often cheaper than buying the same bottle in the restaurant. Most restaurants in my area overcharge for alcohol. For example, my local bar charges $3 for a mixed drink, but the restaurant next door charges $6. I save 50 percent stopping by the bar for my after-dinner drink.
Restaurant meals are over-proportioned, so split your meal in two. You'll eat dinner tonight and lunch tomorrow for one price. It may seem like obvious advice, but it's harder in practice. If you're not careful, you'll end up eating everything on the plate. To beat the extra calories and save money, I divide my plate in half before I start eating. I only eat from my "now" half of the plate and ask for a to-go box for the rest.
Knowing the different steak cuts and how they're prepared will save you money. For example, my friend always goes for the filet mignon because it's well known and tender. It's also one of the most expensive cuts you can order. Meanwhile, I ask if the hanger or flank steak was marinated. If it was, I order that. It's the cheapest steak on the menu, but it's also flavorful and tender - if marinated. MSN says sirloin, flank, skirt, and hanger steaks are really underrated. Give them a chance.
If I've learned one thing being a local in a tourist town like New Orleans, it's this: Tourist traps are alive and well. Many of the famous restaurants tourists want to visit are overpriced and not the best dining experience. If you want an authentic experience and a better price, check out a review site like Yelp or Urban Spoon before you visit a vacation spot. Pick a few places the locals rated highly and check their websites for menu prices. You can save a ton by planning ahead and skipping the hot spots.
I'm fortunate to have very cheap friends. "I don't care where we go as long as it's cheap," is a common refrain on a Friday night. But I also have some less-than-frugal friends who visit from out of town. Since I know they'll want to try that expensive five-star restaurant they heard about on the Food Network, I jump the gun and suggest a similar but cheaper place. If you're dining out with a group, suggest reasonably priced places ahead of time. It will keep you from having to choose between a $25 salad or a $30 piece of chicken.
Around here they call it lagniappe - the little something extra you get for being a great customer. Like the free cup of gumbo I've gotten every time I visit a diner in my neighborhood. I get that little something extra because I'm a regular. Trying new places is great, but you can get a discount (or a lagniappe) by building a relationship with the servers or owners of local restaurants.
With iDine, you can earn 5 to 15 percent back any time you eat out. Just sign up on their website. Within 30 days of your meal, sign on and complete a quick survey. For every survey you take, you'll earn cash back. When you reach $20, iDine will mail you an American Express gift card. It takes some effort, but it's free money. See? Dining out doesn't have to mean going all in - or staying in.