The fact that you spend less on something does not make purchasing it a smart move—or make it something you can afford. A deal that reduces the tab at a favorite restaurant or halves the price of a pair of designer shoes can still be a huge mistake. Yet people get so seduced by the amount of money they're "saving,: they overlook the fact that they're still spending. This needs to stop. Spending a cent on any "want" when your long-term needs are being ignored or shortchanged is irresponsible. A discount can be a disaster if it keeps you from focusing on what's important.
"This is the year I stop thinking of financial windfalls as 'splurge money.'"
Coaxing yourself to cut spending in favor of saving can be hard. Saving money before it ever lands in your checking account is infinitely easier. What I see all too often, though, is a tendency for people to almost mindlessly increase their spending when they receive a windfall like a work bonus, raise, or unexpected gift. Make a pact right here and now that this won't happen to you in 2012—you're going to save 75 percent of every bit of unexpected money that comes your way, no ifs, ands, or buts. The other 25 percent? Feel free to spend it. (But if you want to save that, too, you get my serious approval.) Staying on a plan that's all about denial is nearly impossible; a balanced, moderate approach is more sustainable. So giving yourself permission to spend 25 percent of the money can actually be the key to saving the other 75 percent.
"This is the year I max out my company's 401(k) match."
The amount you save for retirement is far more important than how you invest that money. Don't get me wrong; I want you to pay attention to the types of mutual funds and ETFs you choose for your retirement portfolio. But even the most brilliantly diversified portfolio isn't going to get the job done if you're not putting enough into it. You already know you should contribute enough to your work-based retirement account to get the full match from your employer. Now here's your goal for 2012: Tally up what you set aside in your 401(k) and IRA, and increase that amount by 1 percent. Next year increase it by another percent. Keep this up until you are setting aside 15 percent of your gross income for retirement. I know 15 percent may sound overwhelming, but here's the beauty of this structure: There's no way you can tell me with a straight face that you can't afford 1 percent more each year. You'll barely notice the difference in your checking account. Yet that small difference can add tens of thousands of dollars to your retirement account over time.
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