If January is the month of good intentions, then February is the month of letting your budget slide, “forgetting” to go to the gym, and eating an entire tub of cookie dough ice cream in one sitting. But it doesn’t have to be this way. Success in your New Year’s resolutions is possible with better strategies. Here at The Motley Fool, our mission is “Make the world smarter, happier, and richer.”
With that in mind, in this episode of Motley Fool Answers, hosts Alison Southwick and Robert Brokamp have invited Chief Wellness Officer Sam Whiteside to help out their listeners with advice you can really use when it comes to the most popular resolutions on the health and money fronts. But first, a “What’s Up, Bro” segment looking backward: It’s time to give your portfolio a final grade for 2018, and odds are it is at best a C minus. But Brokamp adds some nuance to the basics of keeping score.
A full transcript follows the video.
This video was recorded on Jan. 8, 2019.
Alison Southwick: This is Motley Fool Answers! I’m Alison Southwick joined, as always, by Robert Brokamp, personal finance expert here at The Motley Fool. Hello, Bro!
Robert Brokamp: Hello, Alison!
Southwick: In this week’s episode, with the help of Motley Fool’s chief wellness officer Sam Whiteside, we’re going to offer actionable advice on how to tackle the top New Year’s resolutions around health and money. All that and more on this week’s episode of Motley Fool Answers.
Southwick: So Bro, what’s up?
Brokamp: Well, Alison, very soon you’ll start receiving those year-end account statements from your brokerages, your 401(k), all your investment accounts, if you haven’t already started to receive those. You’ll get an idea of how your portfolio fared in 2018 and you’ll want to know how you did on an absolute basis because obviously how much your portfolio grows, or doesn’t grow, will have an impact on when you can accomplish your financial goals: when you can retire, how much you’re going to have for the kids’ college education, and all that type of stuff.
But you also want to know how you did on a relative basis compared to relevant benchmarks so you can understand why your portfolio did what it did and if you need to make any changes, so I figured we’d spend this time doing a bit of an investment autopsy on 2018 so people could understand what did well or not as well. Look at their own returns and see how they compare.
Let’s start with the major indices, and by the way, all the numbers I’m going to give are total returns, so that’s the price as well as the dividend that’s included. For 2018, the S&P 500 dropped 4.6%. While the index was down for the year, 160 stocks actually did make money, so a little bit more than two-thirds lost money. About 30% did make money. The Dow was down 3.7% and the Nasdaq was down just 1%.
Those aren’t horrible losses, but I’m guessing that for most people with a diversified portfolio, they actually did worse. That’s because those market indexes are market-cap weighted, which means the biggest companies have the biggest influence. Smaller companies didn’t do so well.
For example, while I said the S&P 500 was down 4.6%, if you equal-weighted all the companies within the S&P 500, it was actually down 7.8%. There’s actually an S&P 400 index of midcap stocks — that was down 11.2% — and the S&P 600 index of small-cap stocks was down 8.5%. If you look at the Russell 2000, which is a broader and more well-known index of small companies, they were down 11.1%. So the smaller your average holding was, chances are you didn’t do as well.
Another factor was style, meaning growth versus value. The S&P 500 Growth ETF, which tilts the holdings toward the more growth-oriented companies was basically flat for the year. The Value ETF was down 9.2%.
Southwick: Could you define “value” quickly?
Brokamp: Value basically is by various measures, a cheaper stock. Lower P/E, lower price-to-sales. Maybe a higher dividend yield. Something like that. So value was out of favor last year, and it’s been that way for a couple of years.
When you look at sector, the three top-performing sectors actually made money, but just barely. They were healthcare, utilities (utilities, can you imagine?), and consumer discretionary. The three worst sectors in 2018 were energy, materials, and industrials. So the manufacturing companies and the companies that are related to “stuff” like oil and things like that did not do as well.
In case you’re curious about what the best-performing stocks were in the S&P 500 last year, they are, in order, Advanced Micro Devices, otherwise known as AMD, was up 73%, followed by Abiomed, Fortinet (not to be confused with Fortnite, because if that were a stock that would have done well), Advance Auto Parts, Tripadvisor, and (because I know a lot of Motley Fool listeners own this stock) Chipotle. Chipotle was the sixth-best performing in the S&P 500, up 46%. If you broaden beyond the S&P 500, the best-performing stock of the broader stock index was World Wrestling Entertainment up 144%.
Who knew? It’s a midcap stock. The worst performers in the S&P 500 were Coty (COTY) down 67%, followed by L Brands, Mohawk Industries, GE (down 57%), and then Invesco. The worst performing of the broader stock market is a small-cap stock known as Cloud Peak Energy down 91%.
Brokamp: I know. Rough year. I made that comment about how Fortinet, which is a cybersecurity company, is not Fortnite. Then, of course, I had to google who owns Fortnite and I found this Quartz article. Fortnite makes $2.5 million a day. It is not publicly traded, although a lot of it is owned by a publicly traded Chinese venture capital firm. But it’s owned by Epic Games, which was created by Tim Sweeney back in 1991 in his parents’ basement in Maryland. He’s now worth $7 billion. I thought that was an interesting little story, so that’s a resolution for 2019.
Southwick: Invent a game that takes over.
Brokamp: That makes $2.5 million a day thanks to people like my son. That’s all U.S. stuff. Then there’s international stocks. The overall non-U.S. stock market dropped more than 14%, but that’s a big bowl of stocks. There’s a lot of differences there. Emerging markets, in general, tended to do worse than developed markets. The best countries — take a guess — Ukraine up 80%, Macedonia up 30%…
Southwick: We just got a postcard from Ukraine.
Brokamp: We did?
Southwick: Yes. I’ll talk about it on the next show.
Brokamp: I wonder if they have any stock recommendations? And Qatar, at 21%. The worst — Venezuela’s stock market is down 95%. Read any article about what’s going on in Venezuela, it is a world of pain. Huge inflation and your stock market’s down 95%. Argentina down 50% and Turkey down 43%. That gives you an idea of what happened across the world.
Whenever you look at your investments, I think you also should evaluate the people who are picking your investments. That could be a financial advisor. It could be a mutual fund manager. It could be that wealth manager you see in the mirror every morning, but someone is making those investment decisions, and I think understanding how your portfolio performed, you should also understand who’s picking those things and whether that’s where a change should be made.
It’s easy with mutual funds because you can just use Morningstar. If you have a large-cap growth fund, you go to Morningstar, you enter its ticker, you click on performance, and you scroll down to the category rating, and if its category is 10, that means it’s performed in the top 10% of funds, so you’re doing pretty well.
It’s harder with a financial advisor, because not only, generally, are they managing your portfolio, but they’re ideally providing some financial planning advice, tax advice, retirement planning advice, but you certainly should still keep them accountable. I think you should choose a collection of indices or benchmarks.
I would choose a total market type of index like the S&P 1500 or the Russell 3000 to compare a stock portfolio to. But I also like benchmarking people to some sort of target retirement fund, so if you plan on retiring in 2040, I think using Vanguard‘s 2040 Fund is a good comparison to what your financial advisor is doing for you or what you are doing for yourself.
Southwick: We never used a financial advisor before, but is this the time of year when if you haven’t heard from your financial advisor you call them up and say, “Hey, what’s up? We haven’t talked in a while.” Is that reasonable?
Brokamp: Completely reasonable, and completely reasonable to ask them to explain the returns and explain what they see as a relevant benchmark to what they’re doing. We always compare ourselves to the S&P 500, but it’s not really a fair benchmark unless you are comparing the performance of U.S. large-cap stocks, which really comes to the Foolish bottom line, here, and that is we talk about beating the market and it’s usually represented by that S&P 500.
But the S&P 500 is made up of U.S. large caps, and it’s getting more growth oriented. All of those things did well this year, so if you had a reasonably diversified portfolio, you trailed the S&P 500. But that’s OK. In years where U.S. large caps trail everything else and then you underperform the market, then you probably have more of a concern. So I wouldn’t freak out if you underperformed the market this year.
I would choose a more relevant benchmark — more like a total stock market index — and give yourself, as well as your financial advisor and any mutual fund managers, at least three years for a fair comparison. But if people are not beating or keeping up with a relevant benchmark over that time period, it’s time to change that.
And then I’ll bring it back to the original point about financial planning and absolute returns, and that is this is a great time of year to use these year-end portfolio values, input it into a retirement calculator to see how the market’s returns last year will affect your retirement goals. And if you don’t feel comfortable doing that, I totally recommend going to seeing a financial planner to do it for you. I think everyone should do that at least once every five years, especially if you are within five to 10 years of retiring.
Southwick: Just under half of us make New Year’s resolutions, most often around becoming healthier or managing our money better, but only 8% of us actually keep them. Even if you’re not making a formal New Year’s resolution, chances are there’s something you’d like to do differently in the coming year. Maybe you put on some extra holiday pounds. Maybe you spent a little more than you should have on presents.
So how can you improve your chances of having a healthier, wealthier 2019? Joining us with the answer is Sam Whiteside, our chief wellness officer here at The Motley Fool. Hi, Sam!
Sam Whiteside: Hi!
Southwick: Every year we bring you in to tackle this topic. Thanks for coming back!
Whiteside: Yes, I love this time of the year!
Southwick: Right? Because people are actually worried about their health for five hot seconds.
Whiteside: Right, yes. I’m super busy! I love that!
Southwick: Bro, remind us again. Why do we care about health?
Brokamp: The evidence is clear. There are many studies that show that health and wealth are positively correlated. Whether one causes the other is debatable. It’s probably a matter of both of them leading to the other. For example, more wealth leads to better health because wealthier people have better and more access to healthcare and also they’re less likely to suffer from financial stress and marital discord, which can take a toll on your health.
On the other hand, being in better health can lead to more wealth because obviously you’re not spending as much money on medical care, and also healthier people are more productive. They’re less likely to call in sick. Those types of things can wear on your career and your income, especially if you’re an hourly wage earner. So lots of interconnections between the two.
And there’s also just the behavioral issues. The bottom line is both of them rely a bit on making smart consumption choices and the ability to delay gratification for a long-term goal. In 2011 I interviewed Roy Baumeister, who is the coauthor of a book called Willpower.
He essentially said in psychology we found out that there are two basic things that predict future success: intelligence and self-control. You can’t really change your intelligence other than some things that have short-term benefits, but you can develop your willpower muscle and there’s spillover effects. For example, if you are able to have better health habits because you’ve made better choices, you can improve your ability to make better financial choices, and vice versa. Those are just some of the ways in which health and wealth are correlated.
Southwick: One of the articles I read preparing for this episode was in Psychology Today, and it was asking why it is so hard to keep New Year’s resolutions. Well, there’s a number of reasons, but you’re constantly trying to resist your urges and that’s exhausting, and it just wears you down and then eventually you eat the whole gallon of ice cream because you’re just like, “Aargh, I can’t do this anymore!“ Then you go for it.
When you look at the list of the top New Year’s resolutions, they’re always vague. Like, “I’m going to exercise more,” or, “I’m going to be better with money,” but vague resolutions are the first step toward failure, right, Sam? Duh duh duh!
Whiteside: Right. It’s long been proven that goals need to be smart: specific, measurable, achievable, realistic, time oriented. That’s not only true for financial success, but for success and your total well-being. Losing weight is the top resolution every single year. It doesn’t change. People want to lose weight. That’s great, but what exactly does that mean?
For me, when I work with clients, whether it’s here at The Fool or whether it’s outside, if someone wants to lose weight, then what is your motivation to lose weight? Are you trying to look better in a bathing suit or do you have a special event to go to? Or is it something intrinsic that’s driving you? I try to find some sort of intrinsic motivator and not an extrinsic motivator.
Southwick: Can you define the difference between an intrinsic and an extrinsic motivator? We talked about it before on the show, but can you talk about the difference?
Whiteside: Extrinsic is like, “I want to look better for other people. I find value in achieving a certain weight goal to get back to where I was in my twenties because I think that’s where my weight should be.” Hello, please don’t do that. I’m in my mid-thirties and I don’t want to weigh what I did in my early twenties. It’s just not realistic.
So making sure that your intrinsic motivator is something that’s going to keep you for the long haul. It’s going to continue to drive you. So instead of saying, “I want to lose weight,” make a commitment to track what you eat and not just necessarily what you eat, but what exactly you eat, how much of that (so portion sizes), and what time do you eat. Getting a more realistic idea of how many calories you’re consuming in a day, and that way you can start to pare down where you think it’s appropriate or sub out foods that you think might be a better alternative.
Also make a commitment to track exactly how much you’re moving (or not moving). You need to know how many calories you’re expending. It’s not calorie in, calorie out, “I ate 2,000 calories today so I need to burn off 2,000 calories.” You can’t realistically do that. Your body is going to need calories to burn when you’re sleeping. All of our body processes requires calories.
So don’t try and do that. Just be realistic about it. Track and start getting an idea of what you’re moving, how much you’re moving, or if you’re not moving and start to make goals around that. Make activity goals and make nutrition goals instead of, “I need to lose weight,” or “I need to get back to 130 pounds,” or whatever. That’s not realistic. It’s not achievable.
I always come at it from this standpoint. Where was the last time in your life where you didn’t have to worry about putting on something from your closet and worrying about what you felt you were going to look like, or worrying if it was going to fit or not. Get back to a place of being happy with your body and not looking at the scale.
Brokamp: Longtime listeners will know, Sam, that I’ve gone through these periods where I try to lose weight by basically betting you I can do it.
Whiteside: We have bet over the years.
Brokamp: First of all, it’s important to me because I’m oriented toward money. One of the first times I wanted to lose weight is because I couldn’t fit in my clothes anymore and I didn’t want to buy a new wardrobe.
Southwick: You didn’t want to spend money.
Brokamp: I didn’t want to spend money. And you pointed out these little things that I’ve done with you, like I’ve got to lose a certain amount of weight or I owe you money. First of all, it’s short-term and it is a little bit extrinsic. It’s just the short term.
Whiteside: It’s almost a blend of intrinsic and extrinsic, because intrinsically money to you is very important.
Brokamp: Right. What has kept me a good 20 pounds below where my max was at one point was finding other reasons. For me, now, as I’m getting older, it’s health. Understanding that I come from a family of people, particularly men, who have heart attacks and who are overweight and to see where that leads. Focusing on things like that motivate me a little bit more. Rather than just whether I look good or not, I want to live a long, happy life.
Whiteside: Right, absolutely.
Southwick: I’ve always understood intrinsic motivators as being motivated to do the thing because you love doing that thing. You’re intrinsically motivated by money because you just plain love saving money.
Brokamp: I love financial security.
Southwick: You love financial security. You intrinsically enjoy seeing your pile of money grow, Scrooge McDuck. That’s why with me I intrinsically learned to love running. Rick intrinsically learned to love doing his weird game with the net and the ball. It’s called…
Whiteside: Oh, spikeball. You’re not even getting close to the mic to pipe in here, Rick.
Rick Engdahl: It’s been a long time since I’ve played spikeball.
Brokamp: The spikeball club isn’t as active as it used to be.
Engdahl: They all moved to Colorado.
Whiteside: They did. They need to come back.
Brokamp: That’s actually an interesting point and maybe, Sam, you’re going to talk about this later. But part of it is finding something that you like to do. So rather than forcing yourself to go to the gym, is there something you like to do. The Fool used to have a Zumba class, which I never had to make myself go to. Probably other people did, knowing that they’d have to see me dance…
Whiteside: No, that’s why everyone came.
Brokamp: …but I was intrinsically motivated to go to that. Like it didn’t require any sort of willpower.
Whiteside: Because it was fun. It was fun for you. We all came.
Southwick: Even though we were so uncoordinated.
Whiteside: Because we wanted to see Bro shake his groove thing.
Engdahl: Sam, bring back Zumba!
Whiteside: And spikeball.
Southwick: Let’s go through specifically what people will say when they resolve, and then let’s talk about some of your ways that you can actually get at that goal. For example, when people make a New Year’s resolution they often say, “I’m going to eat healthier,” and that’s so vague.
Whiteside: That’s what people do.
Southwick: What are some ways people can actually make goals around eating healthier, or ways to make eating healthier fun?
Whiteside: We all know it’s what you put in your body and not necessarily how much you move as far as weight maintenance and weight gain, and that’s not what people want to hear because exercise and getting moving is the easier portion of that puzzle piece. Making the healthier choices or abstaining from certain things that are favorite things is the less easy choice, but that’s where the gains can come, whether it’s putting on pounds or whether it’s actually making the scale move.
When people want to eat healthier, the first thing I want you to do is track your food. Do a three or five-day diet recall where you write down everything you eat for three or five days, including portion sizes, including times, as specific as you can be, and have at least one weekend day in that diet recall. Our weekends sometimes, more often than not, look different than Monday through Friday.
Southwick: And there’s apps you can use.
Southwick: I’ve used MyFitnessPal. It’s so easy.
Whiteside: Tons and tons of trackers.
Brokamp: I use LoseIt — maybe MyFitnessPal does this, too — where you put in the food that you eat (even brand-name foods). It gives you the calories and then also you log in your exercise and how many calories you burned and I’ve said this before on this show, but it really made me appreciate how I can work out for a half-hour and you only burn so many calories and you can totally overwhelm them by just having three Oreos. It’s ridiculous.
Southwick: And you don’t have to do a track forever. Like you can do it just for a week or seven days of that.
Whiteside: No, I’m not a proponent of that. It can be all-consuming and it almost becomes an obsessive behavior and that’s not where our energy should be at all. But get an idea of what you’re eating and how much you’re eating and start looking at it.
And do you have four or five sodas a day? Do you consume a lot of unnecessary processed sugar? How many green vegetables do you eat in a day? Zero? One? That’s a big eye-opener for me. I would automatically say that “eat healthier” for you could mean “increase your consumption of green vegetables.” As specific as you can make it.
Eat more green vegetables. Here at The Fool we did a Taste the Rainbow challenge probably two years ago, and it was I want everyone to try to consume every color of the rainbow in a vegetable per day, which became pretty difficult. Red bell peppers or yellow bell peppers, and it was a fruit or vegetable, so oranges, spinach, kale, and all of these things, but it made people recognize how narrow their diet was.
They were continually choosing or only two or three of the same exact fruits and vegetables every time. Your micronutrients can get out of whack. So your vitamins A, D, E, and K — those are fat-soluble vitamins — we want to make sure all of those are in the right proportion. You need to vary your diet and vary the colors. That Taste the Rainbow challenge was super eye-opening for us here.
Eat healthier can also mean, are you only drinking 12 ounces of water a day? I don’t know. Let’s find that out. If so, for me, I would automatically put you on a hydration challenge. That’s going to make you healthier. You’re drinking more water. You’re flushing out your body. It’s going to make your skin brighter. You’re going to sleep better. Water has amazing benefits that are just innumerable. “Eat healthier” means something different to every single person. You have to look at what you’re consuming to figure out what that means.
Southwick: Let’s talk a little bit more about the resolution of, “I’m going to exercise more!”
Whiteside: That’s probably one of my favorites. I go to the gym every once in a while. As many classes as I teach a year and outside of The Fool, everyone at the gym who’s a regular always is like, “Oh, it’s January. We’re going to get all these newbies in here, but don’t worry. They’re going to be gone in two months, anyway. And they don’t know what they’re doing.” And it’s like, come on. We were all that new person at one time. Don’t be like that. They’re probably really freaking uncomfortable.
Go out of your way to maybe make them feel a little more comfortable. Give them a smile. A high five. A handshake. I don’t know — whatever your choice or modality is. Invite them to a class. Then again, a gym is not for everyone, so when you make a commitment to exercise, don’t force yourself to do something that you hate, because you’re not going to do it. Get real! Going back to the smart goals, is it smart? No. Is it specific? Maybe. Is it measurable, achievable, realistic, and time oriented? All of those things? No.
If you don’t want to go to the gym you’re not going to do it. Don’t pay the membership fee and the initiation fee. Even if it’s Planet Fitness for $10 a month, you might not notice that $10 out of your bank account, but you’re not going to go, because you’re not going to enjoy it. So find something you enjoy.
For me, I love going to hot yoga classes, so I have a hot yoga membership in town and my goal for 2019 is to go to two classes per week. Am I going to hit that every single week? No. Some weeks I might actually go three or four times. Some weeks I might go zero, but make it specific and measurable, achievable and time oriented; but something that you enjoy.
Southwick: We had people do sledgehammering for a while. Are they still doing sledgehammer workouts?
Whiteside: We did! Yeah, we called it hammer time.
Brokamp: Oh, that’s so funny!
Whiteside: I didn’t automatically see that as a form of exercise, but hi, it’s heavy. You’re moving it around. It’s getting your heart rate up. It’s a different form of weight training that I just never thought humanly possible.
Southwick: And it worked for some people here…
Whiteside: It did!
Southwick: … that probably had never tried something else before.
Whiteside: And those awesome Fools did not ever want to come to a full fitness class, which is totally fine. It’s not everyone’s cup of tea. They didn’t want to go to a gym, but they felt comfortable swinging sledgehammers. They were doing exercises that I do with kettlebells in a kettlebell class. I just didn’t know that. But I joined them one day and almost took my shin off and never went back. It’s fine.
Would I buy their sledgehammers? The thing is just to find something that you enjoy, stick to it, and create a goal around it.
Southwick: You guys talked about how Groupon is kind of a fun place to mine ideas for activities.
Brokamp: Yes, I was doing this for Christmas shopping, looking for experiences rather than presents for my family but noticing how many fitness-oriented Groupons there are. And the great thing about that is first of all, it’s a significant discount, usually, but it’s a way to try something without going all in. You get the Groupon, whatever you get. You get a month access to something. You go to the trampoline place, or the workout place, or whatever exercise is there. There’s dancing. There’s Zumba. All kinds of things. It’s a cheaper way to just try something, and you might end up liking it.
Whiteside: Absolutely. Try something new. I really want to get back into rock climbing. I haven’t rock climbed in a long time. We have a rock-climbing group here at The Fool. That’s probably going to be the way that I’m going to get back into rock climbing, is because I know that there’s friends and there’s a social component to it. I know this also works for Bro — find your clan. Find your group. Find your posse. Find your people. Find your Broskis.
Find whomever that is and create some accountability, but also make sure it’s fun. Like you want to talk about your roller skating, you and Rick? We just need to build a roller skating rink down in The Foolatorium.
Southwick: Yes, if we have a roller skating rink down in The Foolatorium…
Whiteside: That was amazing!
Brokamp: That would be awesome!
Southwick: …Rick and Bro would tear it up.
Brokamp: And you!
Southwick: And me. I would tear it up, too.
Brokamp: Just so that everyone knows, we had roller skating at our annual meeting, Foolapalooza, and it was interesting because there was clearly a generational difference between the people who could roller-skate and who couldn’t. So people nearing their 40s, or well into their 40s or maybe their 50s…
Southwick: GenX knows how to roller-skate.
Southwick: We would do a lot of roller skating parties as kids.
Brokamp: The younger kids were not as comfortable on skates, but we had a blast.
Whiteside: You guys were literally laughing everyone off.
Southwick: Oh, yeah.
Brokamp: With the exception of Mac. Mac was pretty good. And Jen Parker was doing pretty well, too.
Whiteside: I just need to build one out on the first floor just for you, Rick, and Mac. And that is all. And it will be yours alone.
Brokamp: That would be awesome!
Southwick: Let’s transition to talk about some money-related resolutions that people often have. One of the top five New Year’s resolutions is, “I’m going to spend less.” Again, very vague. Bro, what should people actually be saying and doing?
Brokamp: I like to focus, first of all, on just spend smarter. Because you have to spend money and some things are well worth the money that you spend and in some of the recommendations I have you might end up spending more this year, but it’s worth the investment.
First of all, I would start by looking where your money went in 2018. This is a good time of year to do it. Many banks and credit card companies will provide an end-of-the-year spending summary. If you use something like Mint or Personal Capital you can do that. You can even download your bank statements into a spreadsheet and sort it that way. But whichever, you want to see where your money is going.
One way I think about it is that spending can be categorized three ways. It either provides a long-term benefit, a short-term benefit, or no benefit. And as you look through things, you’ll see things like, “Oh, I spent money on that, and I love it, and I’ll continue to love it for years.” It could be a shorter-term benefit. “I went out to eat. I went to a movie. I enjoyed it. It was nice. It’s not going to change my life, but it was still worth that.” And there are things that you’re spending money on that you’re getting no benefit from. Things you bought and you never used. Services you’re paying for that you’ll never use.
So you go through that and then try to identify the three biggest things that either provide no benefit or a short-term benefit. One thing we often talk about is eating out. Sometimes nothing beats a good meal, especially when you’re out with your family. Sometimes you go out because you had nothing better to do and you leave and you’re probably like, “Eh, I probably could have done something better with that money.” I think that’s one way to do it.
Another way to think of it is there’s one way to reduce just about any expense by 8% over the next year, and that is give it up for a month. And I think you can give up anything for a month. It could be going out to eat. It could be your cable service. Most cable services will allow you suspend your service for 30 days. Or if you’re not even eliminating it, you’re finding a way to do it better. One thing I’m thinking of doing with my family is to figure out how we could lower our energy bill over the course of a month. Do a little research. What are some ways that we’re using electricity that we don’t necessarily need?
If you do that over the course of a year and just focus on a certain thing every month, I think you’ll realize that you’ve saved some money and a considerable amount of money, probably over the course of a year. Also, you’ll identify ways that you’ve been spending money that didn’t add a whole lot of value.
I think this ties in a little bit to what you do, Sam, because you do the monthly challenges here and sometimes they’re longer than a month. I assume it’s similar in that there’s a mentality that if I say I can’t go out to eat, or I have to give up ice cream, it seems too long and too permanent. But you can do just about anything for a month.
Whiteside: Absolutely. I found that not only because we move so quickly, here, and we’re so project-based, that with any type of health and wellness challenge beyond six to eight weeks the participation drops off. About 70% of the way through people get bored. People are no longer interested. They’ve moved on to something else. They’re focusing on something else. Life gets in the way.
But between three-and-four-week challenges I found is the real sweet spot, not only to start to nudge behavior change, but to make it a really lasting impact, whether you’re starting to cognitively think about the decisions you’re making, or it starts to actually become a habit.
Brokamp: Then the other part of many resolutions is not only to spend less but save more. And I would change that to invest more. Savings, first of all, is not very exciting. Savings usually means cash, and no one gets excited about cash. But here at The Motley Fool we’re big investors, and I prefer to think of it as — instead of spending that money on the thing you were going to buy, instead spend that money on buying shares in the company that makes the product.
In the end, it’s not a question of spend or save. It’s a question of do you spend today on something you buy, consume, and maybe don’t have a long-term value or benefit; or do you spend that money on an investment that allows you to either spend more in the future (because ideally that investment grew), or it allows you to spend money at a time of life when you value it (namely retirement). You’re able, then, to quit your job, have the financial independence, spend the money on vacations and all the other great stuff about being in your golden years.
I think that’s a better way to think of it and the practical way to do that is just, right now, go to your 401(k) and increase the amount you contribute, or go to your IRA and have another $50, $100, $200 automatically debited from your bank account and invested. Make it as automatic as possible so you get that money to those accounts and you’re less likely to spend it on something because it’s sitting there in your bank account.
Southwick: We should have a monthly challenge. Let’s do a monthly challenge!
Brokamp: That’s a really good idea!
Southwick: Thanks, I have good ideas!
Brokamp: You do have good ideas.
Southwick: How do we make it health related and then next week we can do a financial-related one? Finances in January can be a little wonky because of the holidays. Do you want to track our eating for a week?
Brokamp: I think that’s a great idea!
Southwick: All right, that’s it! We’re going to do it!
Whiteside: Do we get to analyze that?
Southwick: We’re going to track on…
Southwick: Maybe. Rick’s like, “This is going to be awful radio.” But let’s track our eating for a week and then we’ll come back at some point next month to talk about what we learned and then have a new monthly challenge. How’s that sound?
Brokamp: That sounds great!
Southwick: All right, we’re going to do it!
Brokamp: I was also thinking in terms of — and this applies to both health and wealth — why people don’t follow through on their resolutions. I was thinking about why I wasn’t able to follow through on past resolutions. I think it comes down to three things: time, energy, and willpower.
And when it comes to finances, if time is your issue, you just have to find a way to do it. And it can’t be, “I’m going to find a half-hour at the end of the day after the kids are in bed,” because then it’s not going to happen. But you have to take a day off of work or on the weekend, clear everything out of the way, and get everything set up.
And with energy, I think time of day is important. In Dan Pink’s latest book it had a lot of good research on this — knowing when the right time of day to do certain things is. I’m going to try this year to make Wednesday mornings my money mornings, because if I save a lot of my financially rated stuff and budget-related stuff to the end of the day, I just don’t get to it, partially because of my job; I’ve been focusing on money all day long. It’s like the football players who say they play football and they don’t watch Monday Night Football because they have that all day long. So I need to do it in the morning or it won’t get done.
And I’m sure it’s the same with exercise. There is some time in the day where you’re going to go and exercise versus other times where you’re just not going to do it. You’re too tired.
Whiteside: Absolutely. I keep thinking I need to get back to the gym that I have a membership with, but I don’t go very often (not the hot yoga but the actual gym). But after I’ve taught two classes here, or I’ve had personal training appointments, and doing all the health and wellness stuff here, the last thing I really want to do is to go work out by myself in a gym. Sometimes it works, especially on the weekends. I can go to the gym because I’m not thinking health and wellness stuff all day, but you’ve got to figure out the sweet spot.
Brokamp: And then finally with the willpower. Again, automate things as much as possible. Make one big-time decision so you’re not required to make multiple decisions. And there are various ways to do that. The automatic investments and things like that. There are more services out there like Acorns and Digit, which will round up your purchases and automatically save it. I personally don’t have experience with those, but I’m going to try them. For listeners who have experience, feel free to email Answers@Fool.com because I’d love to know your experiences with these services.
If you do have trouble with spending, separate your accounts. Again, we’ll use dining out as an example. Just determine how much can you eat out, get that cash at the beginning of the month or just have a separate little account with a debit card. Fill that each month with $100 or $200, and once that’s gone you can’t spend any more. But if willpower is the issue, you have to put up some speed bumps or barricades around it to help you make better decisions.
Whiteside: Absolutely. I’m a big fan of if you’re trying to “eat healthier” in the New Year, make sure that you have healthy snacks wherever you go. I put bags of almonds in my 4Runner in the console. That way if I’m running from one job to another, or I’m running to a pool and I’m starving, I’m like, “Oh, yes, sweet, I’ve got snacks. I totally forgot I had snacks.” Old Sam knew what features there are needed.
Brokamp: Fancy title, Sam.
Whiteside: Just make sure you’re prepared. It’s about being prepared and making sure you set yourself up for success, no matter what it is.
Brokamp: And the final thing I’ll say in terms of spending smarter, and this is where you might end up spending more money, and that is if you need professional help, get professional help. In the case of money, it could be a fee-only financial planner. You pay them for a few hours of their time to analyze their situation, help you figure out where you can improve your budget, help you figure out where you should be saving your money. If you’re having trouble making these decisions with your spouse, you can have this objective third party to help you make those decisions.
But there are also people called “daily money managers,” and they will set you up on Mint or Quicken or anything like that if you don’t know how to do it. They will analyze your budget. They will also pay your bills. They will do a lot of the nuts-and-bolts parts of money management and I don’t think they get enough attention. You can look up the [American] Association of Daily Money Managers.
Southwick: I had no idea that was even a thing.
Brokamp: Yup. The first time I got set up on Quicken, it was my wife paid a guy who came and set all our accounts up and got us going.
Southwick: You’re willing to admit that your wife had to call another man to help you financially?
Brokamp: She said he was working on Quicken. I don’t know. He downloaded something. This was like years ago, and I said something like, “I want to get set up on Quicken, but I just haven’t gotten to it.” She did it as a birthday present.
Whiteside: That’s a good birthday gift!
Southwick: Yes, that is a really good present!
Brokamp: So they will handle a lot of that stuff. It’s the [American] Association of Daily Money Managers. You put in your zip code and you’ll find a daily money manager in your area. That said, many of them work remotely, so you don’t even have to find someone in your area.
And then finally, if you are in good shape but you know someone — a relative, kids — who are not in good shape, give the gift of good, solid financial advice by hiring a financial planner or daily money manager to help them get their act together.
And I assume it’s the same, by the way, in terms of your situation, Sam, in hiring a professional trainer going to the gym. Whatever you need to do to get that professional help to get you over the hump to get you started.
Whiteside: Right, yes. To get you in that space where you feel comfortable going to the gym or doing whatever activity it is. Or staying on track, whatever it is. Whether it’s a registered dietician, a certified nutritionist, a certified personal trainer, an exercise physiologist; whatever area that you want to focus on, hire a professional for a short amount of time.
Southwick: Yes, you don’t have to have them forever.
Whiteside: Make that initial investment. Learn everything you can. Stay in contact with them if you need them for another piece of advice…
Whiteside: Yes, a little quick thing. And start from there. Don’t feel like you’re at this alone.
Southwick: What’s your resolution?
Whiteside: To pay $17,000 on grad school this year.
Southwick: There you go. Pay down debt. That’s another common resolution.
Brokamp: Good, good!
Whiteside: But it’s specific, it’s measurable, it’s achievable, it’s time oriented. Last year I paid around $15,500. This year I’m bumping each monthly payment up just a little bit, so cumulatively it should be over $17,000.
Southwick: Yeah, that’s awesome! Bro, what’s your New Year’s resolution?
Brokamp: My wife and I have the same resolutions. We both turn 50 this year, so our mantra is “Fit by 50.” I think we’re both in generally good shape, and for me, what I’m focusing on is more energy. I’m going to track my energy throughout the day and see if it’s at all correlated to how much sleep I get, to what I eat, whether I exercise or not, so I have a better understanding on what affects me. There are some days where I just crash and I need to figure out why that is.
Whiteside: Track your caffeine consumption and your sugar.
Brokamp: That’s a good one.
Whiteside: Spoiler alert: They’re all related.
Southwick: So you’ve got a lot of things to track as well. I don’t have any New Year’s resolutions. I don’t do resolutions. Do you, Rick?
Southwick: There we go!
Whiteside: Roller-skate more, Rick, in 2019!
Engdahl: I prefer ice skating, but yes.
Whiteside: Ice-skate more in 2019!
Southwick: Sam, thanks, once again, for coming in and talking about this!
Whiteside: You’re welcome!
Southwick: I know for our listeners it might be a stretch that we’re talking about health. As for willpower, dieting, and The Motley Fool trying to teach people finance, there’s so many similarities between them where it’s like, you know this is good for you. You know you need to get in shape. You know you need to get your money in shape, but it’s just so hard for so many of us, so I see so many connections between the two.
Whiteside: There are.
Southwick: Not only just financial, but also just the willpower to tackle both of them.
Southwick: Sam, thanks again for coming in!
Whiteside: Thanks, guys! I love this time of year, right around the holidays and then after the holidays. To see your shining faces. Cheers to 2019!
Southwick: There we go. Best year yet. Yes, cheers!
Southwick: Oh, that’s the show! Our email is Answers@Fool.com. You can also find us on Facebook with the Motley Fool Podcast Facebook Group. We’re also on Twitter. I mean personally we are. We’re not super active…
Brokamp: Not super active…
Southwick: …but hey, chat with us and we’ll become more active, probably. The show is edited resolutely by Rick Engdahl. That’s a word! For Robert Brokamp, I’m Alison Southwick. Stay Foolish, everybody!