Guest Post: Avoid Your Personal Fiscal Cliff


How will you avoid falling over your own “Fiscal Cliff” in the New Year? In this economy, nobody can make guarantees, but if you can stick to these 10 Resolutions, you’ll be doing all you can to avoid the abyss.

Resolution 1: Develop a budget and stick to it by keeping track of everything.

Why do we expect Congress and the President to keep a budget when we don’t do it ourselves?

According to the annual 2012 Financial Literacy Survey, 56 percent of American adults admit they don’t use a budget. I suspect many of the rest, like the old joke says, are lying about it.

There are plenty of apps (some of them free), that can do most of the work for you. Find one you can keep right in your pocket, on your smartphone. That way, you can record every expense on the spot.

Some good ones are Mint or PageOnce.

Resolution 2: Self-impose a 24-hour major purchase decision rule.

Our most regrettable major purchases are those made within 24 hours from first discovery. So, sleep on it.

Wait until morning to revisit the decision (our minds operate the most rationally at that time of day). If you don’t have a prudent plan in place to pay for it by morning, you probably can’t afford the item. Get an app (our BreadVault program has one) and start a disciplined savings plan for the item.

Resolution 3: Every time you get a credit card application in the mail, tear it up before you even look at it.

Resolution 4: Set a dollar limit on the amount of cash you carry, and don’t spend it. Use debit cards instead.

Cash is for drug dealers and tax cheats, and it’s risky to carry it — if not downright dangerous.

Find a bank that offers charge-free debit transactions, and then use your debit card wherever possible. Besides being safer, you’ll have a permanent record of your expenses, making it easier to keep track of your expenses.

Resolution 5: Don’t keep buying pigs in a poke. Always ask, “what’s inside my mutual fund?”

Resolution 6: Obsess about fees.

Your insurance representative, your financial advisor, your banker are wonderful people, I’m sure. They may even be friends. But that’s no reason to do business with them, unless they care enough about you to give you the best deal in the marketplace. Ask them what they’re charging you.

As Bob Sugar said to one of Jerry Maguire’s soon-to-be-ex clients in the worst firing ever depicted on film, “It’s not show friends, it’s show business.”

Resolution 7: Replace the sales process with the education process.

The best consumer protection is consumer education. Again, set a dollar limit over which you’ll require a self-imposed 24-hour “waiting period” before signing or buying anything. Use the time to learn everything you can about the product or service. Check Consumer Reports and online reviews. Do price-shopping. Compare alternate models. Consider Goodwill or e-Bay.

We don’t give them the credit (or the compensation) they deserve, but to be a retail salesperson for major purchases is to be a highly skilled, well-trained individual. Before you buy anything major, take 24 hours to do some homework of your own.

And if it’s something you won’t use very often, think about Resolution 8.

Resolution 8: Never buy what you can share or borrow for free.

Why are you spending your hard-earned dough on tools, ladders and coolers when your friend or neighbor next door neighbor has perfectly good ones in the garage or the basement that you could borrow for free?

The same applies to major service expenses like baby-sitting, and even smaller things like trips to Little League — carpool and save the gas.

The bonus is that you’ll finally get to know your neighbors.

Resolution 9: Show your kids where the money goes.

Just as the only way we teach our kids healthy eating habits by setting an example, let’s show them a good example so they’ll avoid our mistakes.

Once your kids are old enough to understand you can’t spend what you don’t have, they’re old enough to know where the money goes.

There’s a bonus here, too. Once your teenager learns just how much all this is costing, you might just get a little respect — just kidding.

Resolution 10: Create a job description for your kids to get an allowance and have a savings match.

Begin 2013 by teaching your kids the essentials they’ll need for healthy financial lives. In exchange for clearly defined regular chores, pay them an allowance — but don’t stop there.

Our next generation needs to learn the lessons we didn’t: how to budget for the things they need, save for the special things they want and put some aside for tomorrow. And make sure they learn one of life’s best lessons — how rewarding it can be to give to the less fortunate.