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Behavioral Finance: New Year; New Habits

Lose Weight ... Work Out More ... Cut Back on Spending ... Get a Financial Plan – Sound familiar?

We all start with strong resolve and we are determined to crack the nut this time. But then what happens?

The Willpower Trap

Funny that this runs contra to everything we’ve previously been told: If we just have enough willpower we’ll be able to make that change … almost overnight. And yet that’s not the typical result.

Are we really that weak in our resolve? Behavioral science says “No”.  

Willpower alone is not the key ingredient, and our thinking that it should be often creates a new dilemma, instead of getting us to our goal.  So best to avoid that trap.

You don’t have to Spend Less this holiday season… you just have to Spend Right!

The holidays are around the corner, the time of year when things get a little crazy and, unless you’re careful, all that hard work you’ve done on cutting back spending can go out the window. But don’t worry! With a well-laid plan for spending these holidays, you can save yourself some moolah—and some anxiety!

Why not start now?  It won’t take more than 15 minutes here or there to come up with your holiday spending plan.  The below section will calculate your target "spend rate”—the amount that you can reasonably afford this holiday season—and teach you how to adjust as you go along so that you stay within that target.  

What the Fluff? The Truth to Prioritizing your Budget

From our readers’ corner:

Lately I’ve receive a lot of questions from readers, as well as my clients, trying to decide what percentage they should be spending in a particular category of expenses in order to maintain more proactive and empowered financial behaviors.  This is an excellent question and glad that all of you readers realize the importance of “owning” your money!

While it can seem interesting or even fun to see how much you’re spending in a category vs. your neighbors, these percentages are NOT the Holy Grail you should be focusing on.  It only has meaning if you’re comparing yourself to others!  In other words the percentages are a ‘relative’ measure and only have meaning when compared to someone else’s results.  While I agree that it makes cute  and easy to understand pie charts, in terms of how to end up with more money for saving and investing, this is not where to focus your attention.

Do the New Credit Card Rules Affect You? (Hint: Yes, They Do!)

As many of you have heard by now, the Federal Reserve Board approved several new rules providing credit card protection from high and often unreasonable late and penalty fees. The new rules, which will go info effect on August 22, 2010, are meant to ensure that these fees are less costly and more fair for consumers.

The new rules are an amendment of Regulation Z, which implemented the older consumer credit protections established in the Truth of Lending Act of 1968. Since these rules are over 40 years old, the rights they provided are much more limited in comparison to the new amendments.

For example under Regulation Z a late fee payment would be the same amount for a $30 minimum payment as it would be for a much higher payment such as a $70 minimum payment. Under the new rules; however, credit card companies can charge a maximum late fee of $25 with only a few exceptions. 

Here is a breakdown of the rules that you will want to know about: 

The Five Most Common TRICK Investment Proposals

Investment proposals often seem like they are simply too good to be true, and unfortunately they usually are. We created five of the most common investment sales tactics purposely used to trick you into making a shaky investment. Here are FIVE quick and easy phrases that everyone needs to beware of:

Five Healthy Financial Habits for New (And Not-So-New) College Graduates!

The hit song, Graduation (Friends Forever), released in 2000 by Vitamin C, alludes to questions and reflections that I think we've all felt at graduation time. 

"...And so we talked all night about the rest of our lives.  Where we're gonna be when we turn 25?..." 

When at a crossroads in life, it tends to be a time for examining more than just one aspect of our lives. Here is some food for thought for both current and future Graduates on where you might be financially when you turn 25.

The Only Card That Deserves Space in Your Wallet

And it's not a credit card ...

You can call me old-fashioned but I have found that there is nothing that makes a weekend afternoon more satisfactory than taking a trip to my local library. Even on those rare California rainy days, being able to log onto my public library's web site from the convenience of my personal laptop puts a smile on my face. 

There are many reasons why I love the library, and while many critics contend that the bricks and mortar venue has outlived its economically efficient life, I beg to disagree...

The 10-Minute Plastic Rehab Plan - Pt III

Still looking for ways to reduce your expenses or find some extra cash to add to your savings? Here's another quick exercise that will put things in perspective.

1. Making a distinction between "Have-to-Have's" vs "Like-to-Have's"

Start by thinking of and viewing your typical monthly expenses into these two categories. It's important to see how much you need for the essentials like food and rent/mortgage as distinguished from your non-essential expenses...

5 Tips to Increase Your Children's Financial Savvy- Without Them Losing Interest

5 Important Things to Consider when Introducing Your Kids To Money

Whenever I'm interviewed, I typically mention one of my cardinal rules about the importance of teaching children about money. Invariably the next question I hear is:  "At what age should you begin?" 

Based on my experience and personal believes, this question is no different than asking at what age should we begin teaching our kids about other important values we want to instill in them.  When is it too early to learn about honesty, respect, manners, ethics, etc? There's no hard and fast rule, other than: If you don't actively teach them, they will simply mimic your behaviors ... good or bad. With money, the sooner you begin the better- especially if your money habits aren't ones you want your kids to model after!

The 10-Minute Plastic Rehab Plan - Pt II. Turning $3.00 a day into $53,000.00

If you've been following my 10-Minute Plastic Rehab Plan, here's a picture that may incentivize you to stay with the plan.  I think it's our human nature to trivialize saving $3.00 here and $5.00 there. After all how far does $3.00 go these days anyway? It can't matter much in the grand scheme of things ... Right? But this chart tells us a different story...