A Guiding Angel’s New Year’s Resolutions

The finer things in life tend to take time. Frank Capra’s film “It’s a Wonderful Life” was released in the winter of 1946. It would take almost three decades before it became a classic.

Senior angel: “A man down on earth needs our help.”
Clarence: “Is he sick?”
Senior angel: “No, worse. He’s discouraged.”

happy new year

The story’s about a desperately frustrated banker, father and husband who contemplated tossing away God’s greatest gift – his life. Clarence, who hadn’t yet earned his wings in 200 years, was sent to be George Bailey’s guiding angel. Through Clarence, George got to see what the world looked like from a different perspective.

The year ends with bumpy conditions: an aging bull market, slowing economies, political dysfunction, trade uncertainty and tightening financial conditions, to name a few. These can be distracting or give you reason to pause. However, the New Year offers new beginnings and promise. Sometimes we need a nudge to stay on track or reset our financial plans. I’ll share some New Year’s resolutions to improve financial health.

Stick to your plan

Warren Buffett famously said, “It takes only two things to succeed: first, having a reasonable plan; and second, sticking to it. It’s the ‘sticking to it part’ that most investors struggle with.” Your financial success takes effort and mindfulness.

Have a budget for life

Know where your money goes, and where it’ll likely go as you shift through life’s transitions. Think about budgeting like dieting, where we’re coached to eat less and eat smart. And take a financial snapshot (a balance sheet and cash flow) at least annually to see where you stand and your progress.

Manage debt

Some abhor debt (“We haven’t paid interest in 32 years!”) Others use it as a tool. Understand what you can borrow versus what you should. The average American now has about $38,000 in personal debt excluding mortgage, and that balance is up a grand this year, according to Northwest Mutual. Consolidate debt where possible and have an aggressive repayment plan.

Beat inflation

It’s tempting to hide in cash (Note: It’s prudent to have three to six months’ living expenses in cash reserves, or one to two years’ worth for retirees). But most investors need to earn a higher return. Social Security retirees get a 2.8 percent pay raise for 2019, and that’s about $39 a month for the average retiree receiving $1,405 (Note: The maximum benefit is about $2,861 a month). It’s the biggest increase in seven years. Would that be sufficient for you? If inflation averages 3 percent a year, a $100 bill is worth about $74 in 10 years and $40 in 30.

Think long-term and rebalance portfolios

Treasury bills are one of the few major asset classes that are positive this year to date, up 1.8 percent. Bonds are down about 3 percent, U.S. stocks are down 10 percent and international stocks are down 20 percent. Over the last 20 years, Treasury bills have gained about 47 percent, bonds 164 percent, U.S. stocks 286 percent and international stocks 178 percent.

The future is likely to be different; however, the stock market over the long term shows a permanent upward trend interrupted periodically by temporary declines. And stay diversified – you’ll trade “never making a killing” for the blessing of “never getting killed.”

Establish contingency plans

Life can be curly. Manage your risks.

Some may take New Year’s resolutions as folly. However, planning for a lifetime of financial success has big payoffs. May your list of troubles be shorter than your list of resolutions.

You can also view this article on the Reno Gazette Journal.

About Brian Loy

Brian Loy writes insightful and inspiring articles about the ever-changing world of personal finance and the global trends that affect the risk and return on investments and shape the financial- and retirement-planning process.
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