2018 Savings Goals

Every year I set a new savings/ financial goal, but since I wasn't blogging in 2018, I didn't write that one down even though I'm particularly proud of it.  So, better late than never.

2018, I bought a new-to-me car for the first time in years.  I started commuting about 90 miles a day to work, and after buying gas for my 2005 Malibu three times in one week, I snapped and went to get a more fuel efficient car.  Because this decision was somewhat impulsive, I did not do my homework beforehand and ended up financing through the dealership.  Despite my exemplary credit rating, they got me a loan at 5% interest, which seriously filled me with rage.  I tapped into savings and threw a few thousand dollars at it, but interest was accruing on my eight thousand dollar balance much faster than I liked, so I came up with a different plan.

This was around November, which is apparently when credit card companies start aggressively sending out 0% balance transfer letters.  I got one from my Capital One card that offered me 0% interest for 18 months, with a one-time 2% fee.  I decided to take an $8500 cash advance ($190 fee)  and pay off that stupid loan right away.  Then, since the interest rate on that card was 0%, I made the minimum payment on the card, and redirected the rest of my payment into a Money Market savings account that earned me 2% interest.  I'll pay off the card in full in July, before the 18 month period runs out, and for the year 2018, I made $150 in interest.

A few things I had to consider before doing this:

1. I had to do a bit of math to determine if I would have the money to pay that card off in full before the 18 month period runs out.  If I don't pay it off, anything on that card will be assessed something like 25% interest, which I do not want to pay.
2. I had to take that card out of my payment rotation completely.  I disconnected it from any automatic payments, and physically took the card out of my wallet and stashed it in my office at home.
3. My credit score took a bit of a pummelling.  My credit limit on that card is $10,000, and I put $8500 on it and paid it down by only about $100 per month.  That looks really bad on a credit report, but since my score was already excellent, it didn't matter too much.  I got a bit of a bump when I paid off the car loan, but not enough to compensate for carrying such a high balance for so long.

Despite those few drawbacks and minor inconveniences, I am 100% glad I did this.  I saved myself hundreds of dollars in interest on that stupid bank loan, and the balance transfer fee is a non-issue since I'll more than make that back in accrued interest on my Money Market savings account.  I had almost enough money in my emergency fund to pay the bank loan in full without involving my credit card, but that would have obliterated my savings, which makes me deeply uncomfortable.  This way, I was able to keep some liquid cash on hand for emergencies (which I did end up needing).

January is the worst time for resolutions

I've long been unimpressed with the notion of New Year's Resolutions, mostly because people make them (myself included) and then fail spectacularly by February. Then, after having failed, people usually just give up completely vowing to get it right next year. It's just depressing.

I seem to write a blog or a magazine column about this topic every year, but as I see people make the same mistakes every year, I guess it bears repeating. That sounds condescending and rude, which is not the way I intend it to be, I just want to give a fresh perspective to these notions of all or nothing New Year's Resolutions, and try to think of ways people can actually succeed.

Top five perennial New Year's resolutions are:

1. Lose weight
2. Quit smoking
3. Pay down debt
4. Get fit
5. Enjoy life more (or some variation thereof)

I can tell you, January is the worst time to try to get in shape and lose weight.  Just think about it: it's miserable outside which means that all you want to do is hibernate; everyone else is trying to lose weight so the gym is packed; there's no daylight which means you have very little energy; and frankly I don't know anyone who enjoys life in January.  Plus, from a purely evolutionary standpoint, our bodies don't want to drop weight in January, we need it to keep warm.

There is good news though.  January is the best time to start paying down debt.  With holiday buying out of the way, this is the best time to really sit down with your finances and figure things out.  January is the most miserable month weatherwise, so let's harness that and use it to our advantage:

1. Fewer outside distractions mean that you can take the time to really examine your finances, make a budget, and start good habits.
2. Miserable weather and unsafe driving conditions mean that it takes significantly more effort to travel to stores where you may blow your budget.
3. Freezing temperatures make cooking at home cozy and fun.  Go to the library and get some cookbooks, or go online and find some new recipes, then save money by not going out to eat as much.

As far as fitness is concerned, use January to develop better eating habits by cooking at home, then start exercising once there's more daylight.  If you wait until around March, you can often get fantastic deals on used exercise equipment on craigslist (from people who have already given up their fitness resolutions), or you can just start going outside and running, bike riding, walking etc.

As always, with fitness or finance, the most important thing to remember is that one minor setback does not equal failure.  If you stumble, catch yourself and keep on focusing on your goals.  Everyone has had a day where they inexplicably overspend or overeat, but you can always negate it by spending less later or skipping dessert the following day. 

The worst thing you can ever do is be too extreme with your goals because all you can do then is fail.  Rather than saying "I'm going to save $1500/month by never going out to eat and by never turning the heat on."  I've done that, I made myself so sick I couldn't get out of bed for three days and missed a whole bunch of work.  Instead, aim to save $500/month and eat out sometimes.  Moderation is the only way to go, and then you'll nail the "Enjoy life more" goal because you'll be a success.