Funny how a simple turn of the calendar page is like an instant
attitude adjustment: The clock strikes midnight and reboots our
drive to get stuff done. Suddenly it seems like it's possible to
accomplish anything in the next 365 days if we just put our minds
That feeling lasts about three weeks, give or take a couple of
Resolutions HQ is open for business
Well, I say feh on that. This year is going to be different.
Really, it is. If one of your New Year's resolutions is to improve
your financial standing -- perhaps to save more, plug those money
leaks, put your cash to work and make it multiply faster -- then,
by golly, we're going to help you get it done.
Between now and Jan. 14, we'll be showing you how to actually
put this ambitious plan in action so that at the end of 2011, you
can put a big, red check mark beside that finance-related item on
your list of resolutions.
That's it for the pep talk. Now let's get down to business.
Three steps to help you ring in a really happy 2012
Instead of getting preachy and overly complex about this, let's do
this the easy way: Let's put a savings plan in place, ignore it for
months, and revel in our success at the end of 2011.
Step 1: Take a pay cut.
No one puts $20 in their wallet in order to save it. It's there to
spend, so spend is what we do.
So your first step toward securing your financial future is to
give yourself less money to spend -- starting right now. Here's a
simple task to complete in the next couple of minutes:
- Pick a dollar amount you can bear to part with every paycheck
-- don't overthink, just come up with a figure. (Go ahead. We'll
wait.) Write it down on this handy
Save More Kit
Step 2: Hide your money from yourself.
As they say, out of sight, out of mind. And so it goes with
Spending temptations are everywhere. Don't make everyday dollar
decisions harder by weighing whether to get a latte or put that
$4.68 into a savings account or an IRA. You've already earmarked
money you can bear to part with in Step 1. Now you simply have to
put that money somewhere where it's out of reach. The way to do
that is to automate, automate, automate. There are several ways to
- Have your boss take it out of your paycheck: If you have an
employer-sponsored retirement plan you're not maxing out, direct
more of your paycheck to that account. Even a 2% or 3% increase
in contributions will make a huge difference down the line, and
you won't miss it in the present.
- Have your bank suck it out of your checking account the same
day (payday) every month and stash it into a separate account
that's not accessible by debit card or whining.
- Same goes for brokerage accounts and mutual funds. We'll show
you how to painlessly get started propping up your retirement
kitty throughout this series.
Unsure of how much money to put where and in what order? Here
are our guidelines for
short-, mid- and long-term savings vehicles
. Next, it's time to make that money work as hard as it possibly
Step 3: Profit.
Words cannot properly convey the power of putting money aside on a
regular basis and letting it grow. So here's a visual aide that
illustrates how a single $1,200 investment grows over time in four
Savings Account (0.5%)
Money Market Fund (2%)
Certificate of Deposit (4%)
Stock Market (9%*)
*Based on the stock market's historical rate of return.
As you can see, simply socking away one lump sum and leaving it
can transform $1,200 into nearly $40,000 over 40 years. Not only
have you earned interest, but you've
earned interest on your interest
. And all you had to do was invest your first paycheck. Thank you,
Tinker with this
and see for yourself how that figure you chose in Step 1 will grow
in different savings scenarios. Don't be surprised if you decide to
revisit Step 1 and up the amount of money you're willing to set
aside every month.
Stay tuned to Fool.com throughout the next few weeks for more on
how to kick financial butt in 2011.