New year a natural time for financial checkup

lmorris@macon.comJanuary 3, 2014 

The beginning of a new year is a time many people resolve to spend less and save more. The tricky part is knowing how to reach that goal without falling back into the same routine.

“We develop habits over time that are really hard to break,” said Sherri Goss, a certified financial planner with Rosenberg Financial Group Inc., which has offices in Warner Robins and Macon. “When it comes to setting goals, in general it’s easier to approach it from other side. If you do more of what you need to do more of, you’ll automatically do less of what you’re not supposed to do.”

People should set specific goals and take baby steps, “and not set themselves up for failure because they will revert right back to where they where last year, and they won’t be any better off.”

Goss advises clients to do the same thing she does for her own household at the beginning of every year. She creates columns on a sheet of paper headed with major expenses such as groceries, meals out, gasoline, utilities, clothing and savings. She tracks every expense for at least 30 days.

“We use that spending track to evaluate (if) we are getting into some sloppy habits,” she said. “Do we need to cut back on the nail salon and the other stuff that’s not necessary?”

After a couple of weeks, “you have a real new habit of awareness about shopping. ... It helps me reset the spending clock. And it’s critical that people do it with pen and paper.

An important step for people who want to reach their saving goal is to “get your debt paid off,” Goss said. “Otherwise, you’ll never be able to make lifestyle choices you really want. You’ll be trapped.”

The most recent recession actually caused a lot of people to borrow less and pay off high-interest debt, said Greg George, associate professor of economics and director of the Center for Economic Analysis at Middle Georgia State College.

But some people who were out of work borrowed money to go back to school, “so we’ve seen a shift from credit card debt to other forms of debt,” George said.

One of the best things people can do is pay themselves first, he said.

“Before your pay your bills, pay yourself first,” he said. “That’s what saving is -- paying yourself. It’s a good way to frame it, to help encourage people to save more.”

While some people have money in the stock market through a mutual fund or in a 401K, “one of the classic mistakes people make, ... if there is a correction and we have a collapse like we did in 2008, they get scared and pull their money out at the bottom,” George said. “That’s a classic mistake. ... Understand that you ride those out. That’s why you don’t put money in stocks that you can’t afford to lose.”

Jimmy Patton, managing principal and CEO of Patton, Albertson & Miller LLC, a wealth management firm with offices in Macon, Atlanta and Chattanooga, Tenn., agrees that the beginning of the year is a “natural time to kind of look back and look forward” when it comes to finances.

“The first priority for anyone who wants to increase their savings is to establish reserve cash. Everyone should set aside enough money to cover essential expenses for at least six months, he said.

“Second priority is to pay off debt,” Patton said. “And then your next priority is invest in a 401K, particularly if you have a company match. ... Even if it’s not matched (by the company), it’s tax deferred. ... Then if there is still money left after all that, then we would say start an investment program.”

An investment plan could include a systematic savings withdrawal from a person’s paycheck or transferred from a checking account once or twice a month, Patton said.

Because interest rates are so low on certificates of deposit and savings accounts, some people are tempted to invest in the stock market.

“The mistake the people make in investing, they buy when everyone is buying and sell when everyone is selling,” Patton said. “That’s the opposite from what they should do. ... They tend to listen to the people around them instead of taking the disciplined approach.”

Investing is complicated, he said. Events happening in other countries affect investments here, and people need to be well informed to be an investor.

“We all need a financial checkup,” Patton said. “We would encourage everyone to re-evaluate their situation.”

To contact writer Linda S. Morris, call 744-4223.

The Telegraph is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service