WASHINGTON — I meet a lot of people who have spent years making a financial mess of their lives.
They come to me deep in debt. They often have little money saved. Their retirement portfolios — if they have one — are so low that they better hope they stay healthy enough to work into their 70s.
What strikes me most about these folks is their deep regret for not knowing better. But one of my favorite quotes that I use to inspire them to change is from Maya Angelou, who said, "Do the best you can until you know better. Then when you know better, do better."
The first step in doing better is to acknowledge what you've done in the past to get where you financially are now. You need to be honest about the bad habits that you need to break. Here are seven financial habits you should leave in 2018.
• Not saving for an emergency. Forty percent of adults said that if they were faced with an unexpected expense of $400, they would either not be able to pay for it or would have to borrow money or sell something to cover it, according to a report last year by the Federal Reserve.
You've got to save something. If this means cutting cable for a few months, then do it. If it means not eating out, skipping birthday celebrations or vacations, it must be done. You cannot continue to hope that nothing will go wrong and then — when it does — turn to credit cards to bail you out.
• Not budgeting. People love to bad-mouth budgeting. A budget is too restrictive, they argue. It's depressing, they moan. But how's not being intimately familiar with your inflow and outflow of cash working for you?
If the numbers don't add up, go back in there and cut some things. If the numbers are telling you that you can't live alone, you might need to consider a shared-housing situation. Your budget isn't your enemy. It's your guiding light.
• Not opening your bills right away. I have worked with people who come to a budgeting session with stacks of bills unopened. In one case, a utility company had scheduled to shut down someone's service that very day. It took just one call to explain the crisis the person was in to reverse the decision. You've got to face the truth of the financial chaos you've created.
• Not paying off credit cards each month. Stop using credit to live your best life. If you have any credit cards with balances, spend this year and however many more years it takes to get rid of that debt. Don't charge another thing.
While you're paying down the cards, don't cancel them. Just take them out of your wallet — all of them. For many of you, even my suggesting that you not carry the plastic is causing you palpitations right now. You protest: "What if I have an emergency?" And that is why you need a rainy-day fund. If you can't pay off your credit-card balances each month, you are over your head financially.
• Not being able to say no. Stop being the family ATM. Let me be clear. I'm not suggesting that you don't help out friends and family. But you have to be more discerning in whom you help and for what. If you continue to bail out irresponsible people, you are standing in the way of their financial growth. How will they ever be held accountable for their bad financial decisions if you come to the rescue all the time?
For years, because I have done well for myself, I felt guilty not giving family money. That was until I realized I was denying myself stuff so that I could save, and they weren't doing the same.1 comment on this story
• Not having a plan to make better financial decisions. What steps do you take to make sure a decision you have to make is sound? Think about a poor decision you've made in the past that you're still paying for now.
• Not contributing enough to your retirement account. Take a look at the percentage of your pay that you're saving for retirement. If it's less than 10 percent of your gross pay, it's probably not enough. But if you can't do more, at least do better. Try increasing the percentage a little every year until you hit 10 percent to 15 percent.
Every year is an opportunity to be better. The question is: Will 2019 be your year for change?