Sky Gods, Sea Goddesses, Wrestling, and New Year’s Resolutions

Can we talk about new year resolutions for a second?  The most popular resolutions usually relate to health/diet and money.  By now, most people have stopped whatever they resolved to do differently this year.  Which begs the question, why do we wait until some arbitrary date to start thinking about this stuff?  Especially when it comes to things that are so important.  The aliens are definitely scratching their heads.  After a year like 2020, I think a lot of folks are understandably even more focused on health and finances than usual, and I’m here to offer some thoughts on the latter.  But first, why do we make resolutions to begin with?

Sky Gods & Evil Sea Goddesses

About 4,000 years ago, we had to get up and physically change the TV channel with a dial.  Wait.  That’s not right.  But, apparently ancient Babylonians planted their crops for the year mid-March and had themselves quite the party to celebrate.  Have you ever been to a crop party?  They make a Rolling Stones dressing room look like the puppy bowl.  The celebration lasted 12 days.  TWELVE DAYS.  Can you imagine the headache?  It’s like my Mom always said, nothing good ever happens after the 11th day of a party.

During the whole ordeal, Babylonians would swear to pay off debts to their gods and return anything they’d borrowed.  The party was also at least partially to celebrate the victory of the mythical sky god (Marduk) over the evil sea goddess (Tiamat).  In addition to reconciling themselves with the gods and reliving the glory of Marduk, the Babylonians were celebrating, in my amateur historian opinion, having enough food to survive.  That seems a lot more substantive than me hoping to go to bed earlier.  Regardless, so begins our recorded history of resolutions.  I hope the Babylonian gods won’t smite me for saying they kept things simple by celebrating the flood that would provide food for the year.

Wrestling

I think new year’s resolutions are largely a product of a wrestling match.

We instinctively know what to do and what not to do in the long-run.  We could all probably exercise a little more, eat a little better, save more money, spend less time doing ____, more time doing _____, etc.  But knowing what to do and doing it are very different things.  Because we’re in a wrestling match with ourselves.  Long-run me knows I have a fridge full of healthy food that I already bought (maybe next week, raspberries).  Today me knows I like pizza and someone will bring it to my door if I hit a couple buttons on my phone.  Therein lies the the conflict we’re all facing when it comes to resolutions.  Basically, how do I keep this up?

Financial resolutions aren’t particularly fun.  Mostly because a lot of them come down to denying yourself things you’d have done or consumed otherwise.  Not to mention, it might take years before you really start to see the results of your discipline.  And this is where I think most articles about financial resolutions fall short.  I think I came dangerously close when I wrote this last year.  They’re very…tactical.  Make a Roth contribution.  Pay off debt.  Cut back on eating out.  All good stuff.  But all based on denying yourself something you used to do and probably have some positive affinity for.  And they’re cart before the horse anyway.

In It To Win It

You need to give yourself permission to make changes over time.  Whatever you’re committing to changing, you probably didn’t start doing that yesterday.  I bet it’s been an old habit that is going to take some time to improve.  Make sure you allow yourself enough slack to make changes over a realistic period of time.  Especially when it comes to money.  There are only so many discretionary dollars left over after all the bills are paid and it may take some time for you to enjoy your new financial direction by cutting back, saving more, etc.

I think the best way to do this is to start with some introspection.  Why do you want to change?  What will those changes do for you?  How might you feel on the other side of making these changes that you can relate to now so you’re more likely to stick with the resolution?  Protect yourself from complacency by thinking positively about the results of your changes instead of focusing on what you’ll have to sacrifice.

Maze Money

After you understand why you want to change, the next step is to know where your money goes today.  Until you understand that, I’m not sure how you could expect to make much progress.  My clients will know I’m a PITA about figuring out what expenses are and it’s not for grins.  I nicely (I think) ask them to write down their expenses because planning projections are based on at least maintaining your lifestyle today.  If we don’t understand how you live and spend money today, it’s going to be reallllllllllly hard to understand how much to save for tomorrow if you want to keep living the way you do now.

YNAB, Mint, and my personal favorite, TillerHQ are all easy ways to track your spending.  But a pen and paper or a spreadsheet are just fine too.  I’d recommend just focusing on one month to start.  Most people’s expenses are dramatically different than they were pre-covid.  Obviously if you’re unemployed or underemployed, this is going to be a very important exercise.  If you’ve maintained your employment, chances are your expenses have gone down and you’re looking at a growing bank account because you’re not going on vacations, going out to eat, etc.  If you are, they’re probably muted and/or infrequent versions of what they used to be.

Rotten Rates

Now that you have your expenses mapped out, what next?  Well, I generally recommend you maintain at least six months worth of expenses in an emergency fund.  The last year has changed the comfort zone for a lot of folks though, with some people increasing their “sleep at night” number to twelve months.  Whatever that number is for you, you need to make sure you don’t have more cash in the bank than you need.  Because savings account interest rates stink right now.

The bank is not your friend.  FDIC insurance is great and all, but money in the bank is costing you money.  I’m always shocked how often I come across folks with money in “savings” accounts that pay 0.01% or some other laughable pittance.  It’s hard to get much closer to zero!  It’s not their fault.  It wasn’t that long ago that big banks did pay some interest.  We’re creatures of habit, so time goes on and yet the interest rate on that account hasn’t budged.  So time for you to do something about it.

Shop around for a bank that pays a “competitive” rate (by today’s standards anyway), and limit your savings account deposits to the 6-12 month multiple of expenses that’s appropriate for you, plus any big expenses coming up in the next year.

Not a penny more.

Because the paltry savings account interest rate is dwarfed by inflation.  You’re losing an invisible war slowly, and there are probably more productive places for your hard-earned cash.

Understand What’s Changed

There have been three stimulus packages so far.  I’ve tried to summarize all of them for you, or the juicier parts anyway.  There are planning opportunities in each one of them for many, many, many Americans.  But even if you make too much money, don’t have any kids, and a lot of the stimulus package doesn’t apply to you, you still need to recognize that over a year has passed since this mess began.

That time ain’t coming back.  How will you use the money, and time, that you would have spent last year?  Were you behind on your goals and last year was a good time to catch up?  Are you still behind?  How much?

Or.  Were you ahead on your goals, and now you’re ready to see what else is possible?

The mere passage of time is also a cause for more financial scrutiny.  You are at least a year closer to your needing your money for goals, with retirement looming largest for most Americans.  But maybe for you it’s a second home.  Paying for college.

What does the passage of time mean for you?

Invest In Your Life

I mean that very literally.  This is probably a hot take of sorts within the personal finance community but…what on earth are you saving all that money for?  Once you’re on track to fund your goals, you need to trust in yourself or your financial planner that the math works.  I think this approach helps when it comes to planning your resolutions because it can force you to prioritize how you spend your money.  If you are on track with your savings and you deliberately spend your money on fulfilling experiences and items, there won’t be much room left for trivial spending.  

At that point, it’s time to start living.  Because if the past year has taught us anything, I think it’s that our definition of “normal” is very fragile.  You should work hard and save prudently for the future, but the most profound, fulfilling conversations I have with clients are how to SPEND money.  Go.  Build the house.  Stop working.  Plan more expensive vacations.  Enjoy the time with your children.  Buy the lake house.

All savings and no spending makes for rich beneficiaries.  

Bouncy Balls

At one point, I sold less-than-truckload shipping for a company in Springfield, MO.  My goal was to cold call some sort of a financial decision maker and get them to let me come see them to figure out how I could save them money shipping widgets.

It was a lot of rejection, but I diligently dialed because…well paychecks.  Turns out if you call and ask to talk to someone about their FedEx or UPS shipping rates, they aren’t very interested in that conversation.  If you can even get that far.  Most administrative assistants saw me coming a mile away and wouldn’t even put me through.  I was really struggling one day and so desperate to make appointments that I had kind of a glib answer for one administrative assistant. 

“What is this regarding?”

“Bouncy balls.” 

I thought I would get a little creative and tell the administrative assistant that I wanted to talk about bouncy balls.  Was this bold?  Yes.  Was this ridiculous?  Yes.  Did it help?

Well, it helped my spirits anyway.  I still got the same number of people slamming the phone down.  But an astonishing number of people would take the call just out of pure curiosity.  Most would still hang up even after I told them the real reason I was calling, but I could live with that because they’d laugh and tell me it was clever or something, and that filled my tank for a while.  And it helped me make more appointments too.  Even if they wouldn’t make an appointment, they still helped me deal with the rejection ahead of me.  The interest they had for bouncy balls allowed me to weather all the other calls I had ahead of me that probably weren’t very pleasant.  

Why am I telling you this?

I lived for those positive interactions.  I reframed my definition of a win from an appointment to getting someone to laugh.  Focusing on the process instead of the outcome was a game changer.  I bet you have your own version of a story like this.

Don’t Be So Discrete

In statistics, there are discrete variables and continuous variables.  Discrete variables involve certainty.  If I am rolling dice, I know exactly how many outcomes are possible.  I can count them because there’s only 36 ways the dice can land.  There aren’t 36.5 outcomes available.

As I mentioned, today is the first day of spring.  My watch tells me it is 55 degrees outside.  But maybe it’s 55.1 degrees?  Or maybe it’s 55.11?  55.111?  55.1111?  There are an infinite number of temperature measurements if I have enough time on my hands to be increasingly precise.  Temperature is an example of a continuous variable.  

When it comes to goals for your money, be continuous.  Recognize there’s always the potential to save one more dollar.  Be ok with that.  But don’t let it stop you from starting.  Perfect can be the enemy of progress.

As always, I’m available to answer any questions.  If anyone ever says you’re getting a late start on your resolutions, just tell them you’re on Babylonian time.  

Sincerely,

World’s worst bouncy ball salesman