The benefits of mindfulness are well known. With regular practice, mindfulness can lower our stress levels, help us sleep better, and lengthen our attention-spans. However, paying attention to our thoughts and actions does more than boost our physical and mental health; it can also be good for our wallets. Use these four strategies to practice money mindfulness in 2019 and beyond.
Save with Purpose
According to a recent Bankrate survey, 20% of Americans save none of their annual income. If you’re in that 20%, make 2019 the year you start saving with a purpose. That means establishing tangible goals and a concrete action plan to reach them.
For example, everyone knows they want to retire, but ask most people what they want their retirement to look like and you’ll probably get a blank stare and a few vague sentences about flip-flops and the average market value of a condo in Daytona Beach. Having a solid vision of your life after retirement will inspire you to work harder to achieve it.
Once you have a firm grasp on your dream retirement, commit to contributing 10-15% of your income to your 401(k) or other retirement accounts. Use this calculator to get started.
Ban the Word Budget
If the word budget sets your teeth on edge, it might be time to reset your motivation with some more positive vocabulary. In his book, Words Can Change Your Brain, neuroscientist Dr. Andrew Newberg explores the profound impact word choice can have on the prefrontal cortex, the part of the brain responsible for logic, impulse control, and planning.
Newberg found that words with negative connotations drive our bodies to create stress hormones, which can cause us to make impulsive choices (and purchases!) that we later regret. Positive word choices, however, have the opposite effect. Even something as simple as swapping a “negative” word like budget, for something more positive, like spending plan, can increase your motivation and self-control when it comes to spending.
Kick off your spending plan by writing down all of your fixed expenses such as mortgages, car payments, and savings. Then write down variable expenses such as groceries, gasoline, and utilities. Total your expenses and compare them to your income—if you’re outspending your income, it’s time to cut back on those variable expenses. Make sure to reevaluate your spending plan regularly, especially if your income rises or falls.
Know Your Financial Options
When planning for the future, make sure you know all your financial options. For example, there are over 500 ways to claim Social Security benefits, three different types of college savings plans, and a literal alphabet soup of different Medicare plans. You’ll need to do your research to find the best fit for you and your financial goals.
Don’t have the time (or desire) to slog through the IRS guidelines and weigh the benefits of a Coverdell against a 529 College Savings Plans? Or maybe you already did your research and have more questions now than when you started? Consider working with a financial advisor. Advisors are trained financial professionals who analyze every aspect of your finances and create a custom financial plan based on your goals. Here at Cowen Tax Advisory Group, we offer free consultations to help you explore your options.
Practice Emotional Awareness
Large purchases, stock market volatility, and worries about retirement can be major sources of financial stress. Anxiety can make us behave impulsively and irrationally, so it’s important to take stock and cope with these emotions before they lead us to do something we might regret.
Is that new car, house, or other big purchase weighing on your mind? Don’t make it right away. Instead, comparison shop, sleep on it, and discuss it with your significant other or a close friend. Wall Street turmoil keeping you up at night? Call your advisor before torpedoing your portfolio with hasty selling. Scared your retirement savings will run out? Discuss your options with a professional retirement planner.
Sara McKinney
saractag@gmail.com
Sara is a recent graduate of Kalamazoo College and a new addition to the Cowen Team. Her responsibilities include IT support, digital content creation, and database maintenance.
