New Year’s Eve and New Year’s Day are awesome times to get on social media, confess your sins, devote yourself to a holy and righteous existence and avow to sin no more. Yet by the end of January, over half of people have given up on their resolutions, and by the end of the year less than 8% actually make it, according to the University of Scranton. A big reason for this is that when we make New Year’s resolutions, we focus too much on what we want the end goal to look like instead of improving our individual decisions, making better choices that lead toward that larger objective.
Here is a list of 4.5 things you can do, right now, to score some easy wins in improving your personal finances. Apart from these, if you are interested in a FREE one-month online course to improve your spending and saving, join the first annual Briggs Financial Spend Smarter Boot Camp RIGHT HERE!
With that said, here’s the list:
1. Got some credit cards you need to pay off? Start with the smallest credit card balance and work your way up the list. Every card you pay off can snowball it’s minimum monthly payment into the next card, and it always feels good to pay a card off. Start with an easy win and work your way to paying off the bigger balances as the smaller ones fall off.
2. Improve what you eat to improve your budget. Work on buying more food at the grocery store, shopping 1-2 times a week. Chop ingredients in advance and invest in some food storage containers to take lunches to work. Make coffee at home, not Starbucks. This will help you cut out fast food and convenience dining, potentially saving you hundreds of dollars a month. If you want suggestions for great coffee, email me at email@example.com and I’ll espressopinions about a great cup for you.
3. Update your resume and work on improving your compensation in 2019. With the labor market at its most tight level in over a generation, take advantage of this to earn more. Learn and feature new skills to make yourself a more attractive candidate. Talk to your bosses and HR about advancement; if there are roadblocks, address them, or work hard to find a better gig. No one will advocate for you as hard as yourself. The squeaky wheel gets the promotion, so either be persistent or settle for a cost of living adjustment. Your choice.
4. Add a little extra contribution to your retirement savings at work. It’s easiest to save when the resources go immediately in without you having to take extra steps to invest. An extra $50 a paycheck or an additional 1% a year can make a big difference over a long period of time with compounding, while not being too much of a pain on the bank account.
4.5. Make sure if you can afford it to maximize those retirement contributions. Contribution limits are higher this year. The increased limit for individual retirement accounts in 2019 is a really big deal at $6,000 — up from $5,500 in 2018. For Roth IRA’s and Traditional IRA’s, that is an increase of over 9%. Also, in 2019 you will be able to save up to $19,000 in your 401(k), up from $18,500 in 2018.
My crystall ball works just as well as yours in prediciting the future. It doesn’t.
The economy continues to make substantial strides as consumer confidence and manufacturing grow in step. The House of Representatives flipped 40 seats to the Democrats along with a bevy of state governorships. Consistent policies of tightening interest rates are acted upon globally, led by our own Federal Reserve. Tariff talks have jostled stocks more than landing into O’Hare on a windy day. And political unrest exists in nearly every geo-region on Earth. Also, Black Panther was released, and there was a winter Olympic Games – can you name the city?
2018 has been one wild ride of a year. So the natural question is this – where do you go from here, and how do you plan accordingly?
I will preface this section by stating that my crystal ball works just as well as yours . . . well, if I had a crystal ball that is. It’s a shiny, well polished piece of stone, and that’s about it. However, I do think we can glean from how various parties have acted and reacted as a means of guiding some thinking about how we position ourselves long-term.
1. Tariff talks will take substantially longer than anticipated. While I do believe the United States and China will come to some agreements, I do not believe they will be as overarching as advertised by the administration, namely because the Chinese are not under nearly as much political and financial pressure as we may be led to believe, but there definitely is an underlying risk to the “One Belt, One Road” initiative if the Chinese do not concede at least on some amount of substance, that the rest of the world will decide to do more business elsewhere. I do believe the Chinese may attempt to prolong talks into the next US election cycle; this may actually help Chinese equities that have been undervalued start to decouple from the US-China trade rhetoric.
2. Interest rates will continue to rise, albeit more slowly. U.S. housing data indicates a tepid market for both new constructions and purchases, in spite of improving wage growth and economic conditions. It is a mistake to believe that raising rates will necessarily hurt home buying – historically the opposite has been true, but there also historically has not been such elevated levels of college debt in the market. I am expecting 2-3 rate hikes in 2019, with 2 more in 2020 based on current economic conditions.
3. Political unrest will not subside, but may substantially rise abroad. Brexit is under great duress. Nearly every geo-region is debating policies evoking nationalism. Interest rates are still unnaturally low in many markets, and China is facing a potential corporate debt bubble that could paralyze the yuan further. This may affect a number of markets, particularly in technology and pharmaceuticals, and stands to potentially destabilize Asia as a geo-region if internal political forces reflect market challenges.
4. Corporations will continue on the whole to exceed earnings expectations. However, similar to 2018 they will not be particularly well-rewarded for doing so on announcement, while earnings misses will be punished swiftly. This has been an increasing undercurrent the last couple of years, and I expect that reactive environment to continue in 2019. However, I also believe that an undercurrent of acquiring assets with defensive components will increase next year, meaning that even as these stories play out, fundamentally strong companies will weather the turbulence substantially better than most. I do expect share buybacks and dividends to roughly equal earnings growth for 2019 equity price increases.
So this all said, how do we think about things moving ahead?
First, I think we think about the overarching philosophy of our investing mindset. An investing mindset takes a very long-term perspective, including through turbulent and challenging markets, in what investments it selects. We are not clairvoyants, we do not seek to attempt to divine the future, but we can think heavily about what opportunities can exist and what threats can exist to what we are invested in, and act accordingly.
This means that fundamentally, given the narrative proposed earlier, companies with substantial debt may be under further pressure and risk over time. This not only chews into profits, but may in fact be an existential threat to a number of businesses today.So when we look at companies, we need to see which companies not only will be fine in a turbulent environment, but who may potentially capitalize and take advantage of a market where they are positioned more strongly than their peers. This doesn’t just mean survive – it means being on the buying end when other companies and assets are under pressure to sell, using their entrenched market positions and free cash flow to facilitate future growth.
I think that the U.S. market economy and overall market health is strong. However, I also believe there are individual companies, individual investment ideas that stand to do well for years to come that have been heavily discounted by the market up to this point for the aforementioned political and economic reasons. These companies exhibit the same fundamentals as strong domestic companies, but may not have the same favorability purely based on their geography and biases against such. This is an opportunity.
Lastly, keep in mind that by admitting to being non-clairvoyants, that market timing and trying to predict how a market will move week to week or month to month is a fool’s errand. There are so many inputs, so many factors that can literally move and and every position, that trying to say “now THIS is the bottom” or “now THIS is the top” is a waste of energy and does not make sense. On the assumption that we believe over the long-term that the value of what we invest in will grow, taking advantage of dollar-cost averaging and thus buying at a lower-than-average cost over that span of time makes sense. Not being caught in the costs associated with trading frequently and the risk of guessing incorrectly and failing to capture growth makes sense.
Being prudent is boring. I also believe being prudent is highly profitable.