Radio: Seven Financial Resolutions for the 2019 New Year

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On Tuesday, January 8, 2019, David John Marotta appeared on Radio 1070 WINA’s Schilling Show to discuss financial resolutions for the 2019 new year.

Listen to the audio here:

Or read about seven financial resolutions that you could make here:

First, resolve to be and stay debt free. You are allowed to have a fixed-rate fixed-year traditional mortgage on your house and student loans, which you pay off as slowly as possible while saving and investing the difference. But you should have no other debt — no equity line of credit on your house, no car payments, and certainly no credit card debt.

To a financial advisor, even a little credit card debt is like having a cluster of thousands of baby spiders crawling on your body and under your clothes: You cannot act fast enough and there is no amount of modesty worth leaving the situation unresolved. The average household with credit card debt impoverishes their financial life by over $2 million. You have to learn to live within your income, which sometimes means going without. Millionaires are frugal. Learn to enjoy it.

Second, get the entire match that your company’s retirement plan offers. Usually this translates to saving 5% of your salary while the company contributes a 4% match, the fastest way to get an 80% return on your money. Most Americans forgo this match, believing they need to spend 100% of their salary. But you can live well on 95% or less of what you make. Most spending is mindless spending that does not help you reach your life goals.

Third, fully fund your Roth IRA to the annual contribution limits. If you can’t manage the entire amount in January, this savings can be automated by putting in one twelfth each month.

Fourth, save 15% of your salary in a taxable brokerage account. Five percent is for retirement and the other ten percent is for unknown emergencies. You can automate this savings. We call this technique “The Automatic Millionaire” and it will potentially make the greatest change in your finances. Surprises in your spending are very common: the roof leaks, the car breaks, you need to travel for a family event. Most families budget every dollar they make and therefore have to go into debt when unexpected and unplanned purchases need to be made. Be smart and budget for these unknown unknowns. You will be better prepared for life’s emergencies. And if the emergencies don’t materialize then you will simply have more savings for the future.

Fifth, save an additional 10% for charitable giving. Many millionaires might suggest being generous should be number one on your list, but you need to put on your own oxygen mask before assisting others, as the saying goes.

No matter where you think charity belongs in your priorities, a sensitivity to the truly needy will change your perspective about distinguishing needs and wants. It encourages the happy habits of appreciation and gratitude.

For millionaires, living simply enables them to help others simply live.

Save the additional 10% for charitable giving in your taxable account. Then, when it comes time to give, gift the investments from the account that have appreciated the most to save on capital gains tax.

Given the 2018 tax code changes, you may also want to look into gift clumping or, if you are over age 70 1/2, qualified charitable deductions.

Finally, try saving even more. Expand this financial engine beyond 35% toward 50%. Unless you are among the truly needy, there are families out there living comfortably on less than half of what you earn.

And if you are among the genuinely wealthy, the only obstacle standing in your way is that you are accustomed to an affluent lifestyle. Learn to value financial freedom over opulence. Developing an engine of wealth production takes foresight and self-restraint in addition to time and patience. But the reward is financial peace and contentment.

Photo by Adrian on Unsplash

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President, CFP®, AIF®, AAMS®

David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. In addition to his financial writing, David is a co-author of The Haunting of Bob Cratchit.