Spiraling up

Did you know that hamsters can run 10 km at a time without stopping? That’s why hamster wheels were invented. They are designed to help domestic hamsters run off all their excess energy while they are confined to a cage. The fact that the hamsters never actually get anywhere is irrelevant. Their needs are being satisfied in the most successful way possible given their circumstances.

We humans, on the other hand, are meant to be improving ourselves and our lives every day -moving forward and not being stagnant. Sometimes it feels that we are on that hamster wheel, but since we aren’t hamsters that wheel isn’t our ideal medium for helping ourselves.

The reality is that we tend to do similar actions month in and month out. If we look back over the last year, which we tend to do around this time of the Jewish New Year, we might feel that we are in the same place as we were last year – and that thought can be pretty disheartening.

To avoid this situation going forward, here are some points that will hopefully help change our perspective and improve our lives, and our finances.

Spiral not wheel

Although our lives might feel the same, year in year out, we need to visualize ourselves on a spiral, not a wheel. That means that despite the fact that we might be repeating actions that we have done previously (like the Jewish concept of time where we repeat the cycle annually), we can still strive to be on a higher place up the spiral, albeit at a similar point in the circle. And the direction is decidedly up. While our finances might exhibit a certain cyclical nature, we should still be striving to improve how we manage the resources that we are blessed with over the year.  There might be financial ups and downs, but we should be aiming to use our basic financial habits to help us get closer to our long-term goals.  Start by looking at the big picture and see what small but immediately impactful steps you can take towards improving your finances in the upcoming year.  If you start working on your financial stability in a way you haven’t done before, you are most definitely moving up the spiral.

Underwhelming New Year resolutions

One of the main reasons we break our New Year’s resolutions is because the goal is too general and/or too ambitious. Write down three specific financial processes or goals you would like to change, and then make your resolution be a small, manageable element of that task. For example, if your resolution is to save money, that will never happen unless you break it down to how specifically you plan to save and where. And then downsize it to a specific amount on a monthly basis that you plan to save regardless of any crises that might happen. The problem with New Year resolutions is that once we blow them we tend to leave them by the wayside which defeats the purpose completely.

Non-threatening budget

Your budget doesn’t have to be set up and completed in one sitting. That’s way too overwhelming. And you know how best you work – either with the latest technology, or more old school style. If you have a smartphone or are technologically savvy there are countless budgeting apps to help you track. But there’s also no excuse for putting it off if you don’t like the technology – pencil and paper can work equally well! Just make it happen. Once your budget is in place, you must set aside time to monitor your expenses and income so it remains a relevant tool to keep you on track financially.

Managing debt

You know your debt and the repayment interest rates, and your income level.  Is your debt reasonable and affordable given your income? Are the interest rates you are paying in line with other possible options like taking loans from your keren hishtalmut or pension manager (where rates tend to be very low)?  If being debt-free is important to you, put a plan in place to get there.   Psychologically and administratively it might help to pay off smaller debts, which will help you build confidence and better able to focus more on larger debt issues.

Automate good habits

Learning good financial habits is a process that takes time and repetition. But help yourself by automating payments either to pay off debt or contribute to savings. The earlier you start saving the better because you benefit from compound savings. And because it is so crucial, if necessary, make your initial savings amounts small enough for you to continue even when crises happen.

When you finish paying off a large purchase, instead of letting that amount flow into your checking account from where it will flow out having barely made a mark, put it aside in your ‘rainy day fund’. If you managed to live without that amount while you were paying off the purchase, you can continue with the same sum, thereby reinforcing your good financial habits.

Research shows that humans receive a disproportionate level of encouragement from even the slightest sign of progress or improvement, as opposed to hamsters who’ll just keep on running. And when encouraged we are far more likely to continue. Make your changes incremental but long term and they will send you spiraling upwards.

Wishing all of Am Yisrael a happy, healthy and fulfilling New Year.