Personal finance expert Jean Chatzky joins Yahoo Finance Live to provide tips for attaining financial resolutions in the new year.
– It is time for those New Year’s resolutions. And if getting your financial house in order is one of them, you’re in luck because personal finance expert Jean Chatzky is here now with ways you can make the new year a profitable one. We also want to mention she is the host of the new radio show and podcast “Everyday Wealth” with Soledad O’Brien. Always great to see you, Jean. Happy New Year.
JEAN CHATZKY: Happy New Year to you too. Nice to see you.
– So even before we make those New Year’s resolutions, you say it is important to do two things. Embrace your current reality and not compare yourself to other people. Sometimes easier said than done. Why are those two things so important?
JEAN CHATZKY: We have to know where we’re beginning in order to get where we want to go. And, really, that’s a matter of getting a handle on three touch points financially. Where is your money coming from? What’s coming in? What’s going out? And where it’s going. I know that a lot of people try to stay away from the numbers. But I find the numbers very freeing because they don’t lie. They’re honest. And once you’ve got a grip on it, then you can start to move forward.
And “you” is the operative word there. When it comes to your money, everybody has different goals. Everybody has different aims. And you should be using your personal resources as a tool to get what you want. If you can shut the rest of the world out, whether that means shutting out your colleagues and your friends or whether that means shutting out social media because it’s telling you to buy certain things or to wear certain things, you’re going to be much more successful in getting to what your ultimate goals actually are.
– And then apart from setting goals, you also say it’s a good idea moving down that list to automate your savings.
JEAN CHATZKY: Right. So when it comes to our goals– and the problem with many New Year’s resolutions is that they are way too big. If you’re doing dry January, for example, as so many people are, I think you’re better off thinking of it as four dry weeks or 31 dry days because it’s a lot easier to hit those marks. And the same is true with your money. When it comes to saving, it’s great to say, hey, I want to save $5,000 this year. It’s a lot easier to say, I want to save $100 a week, or I want to save $16 a day, or however you want to break it down.
And then yeah. Automate it. Human beings are creatures of impulse. We see something. We want it. We buy it. And technology, when it comes to our money, has just made that so much easier. Automate your savings. Take the example of a 401(k), which is the most successful savings vehicle that we have, and just put it in place in other places in your life. So if you’re putting money into a health savings account, or an IRA, or a 529, or a plain vanilla savings account, automate those contributions so that they just happen every single time you get paid.
– And some of those accounts, of course, also have some tax savings to go along with it. So you’re even saving more really when you think about it. You also say– this is another one that’s easier said than done– ask for the money you want. Are you talking about going to your boss and asking for a raise? And what’s the best, most effective way to do that?
JEAN CHATZKY: Yeah. That is exactly what I’m talking about. And the jobs numbers that came out yesterday pointed to the fact that a lot of people are in fact doing it. They’re doing it by resigning. We had more people resign their jobs in November than we’ve ever seen before. A lot of them are not leaving the workforce for good. But they’re going out in search of higher paying opportunities.
And switching jobs is probably the best way to get a substantial raise in your salary. We’ve covered this pretty extensively at hermoney.com, particularly when it comes to the idea of women closing the salary gap. And I have a number of suggestions. But you want to make sure when you are going to your boss at your job that you’ve taken the pulse of the current work environment.
How much would somebody with your skills get paid if they landed a new job on the open market? How much are other people in your company being paid, if they’re willing to talk about it? And then you have data and information along with your history of being productive for this company. This is not about you wanting a raise or you needing a raise. This is about what you have done for the company that you can bring forward to that manager.
– Jean, I’m going to suggest one more to add to that list of best pieces of advice, and that is to just say no, which is what I wish I could do to my kids who are always asking for financial help. But I want to move on to some of your recommendations as well. And one of them is for saving money. Make your goals specific, tangible, and with a timeline. How do we go about doing that?
JEAN CHATZKY: So once you have a handle on what the goal is, the internet can be your best friend in terms of doing research. So maybe it’s retirement. You’re trying to figure out how much you’re going to need in order to retire at a certain date. 10 times your salary by the time you leave your work job is a good number to aim for. But maybe it’s a smaller goal. Maybe you’re looking to go on vacation when we’re all allowed to travel freely again or feel comfortable traveling freely again. Go online. Do the research on that vacation. Figure out how much it’s going to cost. Then figure out when you’re likely to take it. And then just do some simple division.
The number of weeks or months between now and when you’re saving. Divide it. You know how much you have to put away every single month in order to get yourself there. And all goals work the same way. And then track your progress as you go. It’s a little like running a race. It’s a little like running or training for a marathon. We can feel good about the progress that we’re making before we get to the actual goal. We just have to allow ourselves to see it. And so that may mean, if you’re putting money into a savings account, or into a 401(k), or an HSA, or a 529, once a month go on a little tour of your accounts. Visit them. I know that sounds a little silly. But go ahead, take a look at them, and see how your money is adding up.
– Awesome, solid, smart advice as always. Jean Chatzky, thanks so much. Again, the radio show and podcast called “Everyday Wealth.” with Soledad O’Brien. Great to see you.