Happy New You! Our columnists share resolutions, aspirations and admonitions for a rewarding 2008.
Many people think about personal finance as an unemotional, detached pursuit, but it’s really nothing of the sort. Money is a means to an end, and what you do with it is all about feelings and values. My wish for 2008 is that the luxuries we choose will fill our lives with warmth and that we will get the precious things that we yearn and work for. With that in mind, here are my New Year’s resolutions:
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I won’t spend out of habit . . .
We waste money partly because we get into costly habits that are often established before we even get our bearings in the working world. We stop at Starbucks on the way in, or grab take-out on the way home, for example. On the rare occasion that we think about the cost, we justify the spending by thinking that we’re going at a break-neck pace and its faster to buy coffee than brew it -- and it’s certainly quicker to buy dinner than make it. But the goal of life is not to get to the finish line first. Unless money is no issue, it’s important to occasionally look at your habits and make sure that they’re not robbing you of the wherewithal to feed more precious goals.
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. . . or temptation.
Americans are subjected to hundreds of marketing messages daily, said John Busacker, president of Inventure Group, a life planning firm in Excelsior, Minn. It’s hard not to get sucked into consumerism’s endless web.
“Every day, we’re bombarded with these messages that are trying to concern us with what we don’t have. We need to acquire. We need to acquire now,” Busacker said. “If you don’t have some sort of values-based system to filter those messages you get pulled in. But the products can never fulfill the promise of the advertisement -- to make you feel better or look better.”
For me, resisting temptation meant that my family lived without cable television for several years, which in my neck of the woods meant that there was no television at all. The decision went so against the grain that I had people looking at me as if I’d lost my mind. (“Are you going to turn off the electricity next?”)
But I reasoned that access to a television meant that we could be lazy. We could be entertained by someone else’s attempt at conversation and amusement, rather than our own. Despite feeling a bit dazed when my friends discussed the latest episode of “The Office,” I loved shutting off the electronics. It demanded that my kids and I spent more time playing board games and basketball than sitting in a virtual coma on the couch.
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My spending will match my values.
Close your eyes and spend a minute or two considering the things that make you happy -- that give you energy and make you feel fulfilled. Are you in a room full of gadgets, or a room full of friends? Are you in the wilderness, or at a resort? How close is this picture to the way you live your life? If you’re imagining vacations and vistas with family and friends, is it something that’s well supported by your job and your budget? If your picture includes things, what are they? Do you have those possessions or do you need them? Do you have others that might be getting in the way of acquiring the ones you need?
Everyone has a limited amount of spending power, Busacker notes. So, when you buy one thing, you’re probably giving up another. Are you happy with the choices you’ve made?
“We are impulse buyers,” said Eileen McDargh, author of “Gifts from the Mountain: Simple Truths for Life’s Complexities.” “Sometimes we become prisoners to our material choices.”
The concept came home to McDargh when we was interviewing an executive for a book.
“This guy was talking about his lifestyle,” McDargh said. “He had three sets of golf clubs and memberships in four country clubs. His kids went to private schools. And he was miserable. He had surrounded himself with so much stuff that he felt trapped by his choices.”
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I won’t think just about stuff.
The problem, McDargh says, is that the room you’re sitting in is probably full of stuff -- all of which has to be paid for. But the picture in your head may be more about people and experiences than things. Buying too many products robs you of the chance to get what is really important.
McDargh and Busacker emphasize that they’re not averse to spending. They just think you should spend thoughtfully -- on things that make your life richer, rather than simply more cluttered.
For example, McDargh just remodeled her kitchen to create a big open room where her friends and family can gather. It was expensive, she said, but worth every dime.
“It’s absolutely wonderful,” she said. “I could rationalize it by saying it increases the value of the house. But that’s not what it was about. It creates an environment that makes me happy, and everyone walks in and they smile.”
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I will think about trade-offs.
This means looking at what I can do without. For example, Busacker says he and his wife drive older cars as a trade-off for taking several vacations a year with their college-age children.
“It’s a luxury and we appreciate it as such, but it links up with our core values as a family,” he said. “Good financial planning is not a mathematical exercise. It’s an exercise in knowing your own values.”
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I will know where my money is going.
Many people complain that the money they need to spend exceeds the amount they have. McDargh says that’s often because people don’t keep good track of how they spend. She suggests that you carry around a notebook and write down every dollar you shell out and what it purchased. She also suggests you go through a year’s worth of checks and credit card receipts and tally everything up. Once you do, you might be surprised at how much was wasted on things that have little real value.
In a way, all these resolutions add up to one all-encompassing resolution:
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I will spend my money consciously.
It sounds simple, but it’s so difficult to do. That’s because it requires thinking not only about what you’re spending, but also about why -- and what those purchases say about you and what you hold dear. It’s a matter of asking whether the choices you make with money reflect your values. You only need to do something about it if they don’t.
“If you are going to have a sense of fulfillment and of being settled around finances and possessions, it’s tied directly to whether you are spending consciously,” Busacker said.
That’s the essence of using money as a tool to make your life richer. If we all did this, I believe that our lives -- and the lives of those around us -- would be better, calmer and kinder. I believe that most of us would realize that we have far more money than we need. And, instead of buying baubles, we could use the excess to fund precious long-term goals or to help others -- whether that’s friends, relatives or a cause.
Happy New Year.
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