Christakos: 2012 - The Year You Rightsize Your Finances

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It’s trite but true: With the beginning of a new year, our thoughts turn to a fresh start, and ways to improve our lives, our health, and our habits. In other words, the perfect time to start rightsizing your finances.

I’m a big proponent of rightsizing personal finances to match one’s goals and desired lifestyle, with the ultimate aim of a seamless transition to retirement.

That’s right: retirement.

Whether you’re a recent college grad or a card-carrying member of AARP, rightsizing your finances is about making changes now that will translate into a financially stable retirement period—even a retirement that lasts for decades.

But let’s not get too far ahead of ourselves. Instead, let’s focus on starting the new year right, with some easily attainable goals and good habits for rightsizing expenses:

Lower the ceiling on housing costs. Housing plays a huge part in my vision of rightsizing your life. But for now, I’ll just say that if your current home suits your needs and you plan to stay there for at least several years, this may be a wonderful time to refinance. You can take advantage of today’s low interest rates to save on your monthly payments, or shorten the time you’ll be paying your mortgage.

Health insurance: cover yourself.

If you or a family member is seeking employment with health coverage benefits, you likely have more options than you realize. If feasible, consider part-time work rather than buying an expensive individual policy. Some employers offer their part-time workers benefits including discounts, medical and dental coverage, and even retirement plans. The following companies extend some benefits to those who work part-time equivalent hours:

• Barnes & Noble
• JCPenney
• Lands’ End
• Lowes
• REI
• Starbucks
• Trader Joe’s
• UPS
• Wegmans

(Please note: Benefits are subject to change without notice)

Call off high phone bills. Today there are seemingly endless alternatives for telephone service—and just as many different costs and fees. Whether mobile or landline, phone service can be a big expense for a family, and savings can always be found with some diligent research. For your home phone, consider changing to a computer-based application such as Gmail or Google Voice; both are free for calls to the U.S. and Canada (at least through 2012), and you can include simple texting or video chatting.

For overseas calls, you can get extremely low rates on these services or a similar service like Skype. For instance, through Google , you call the United Kingdom for 2 cents per minute on a landline or 10 cents per minute on a mobile. Skype is slightly more expensive, and offers pay-as-you-go or monthly subscriptions to specific countries.

Reduce your grocery bills. You may think that your food purchases are a necessity and, therefore, non-negotiable in terms of rightsizing. But even if you are reluctant to start clipping coupons (which can really trim your expenditures, by the way), you should do some comparative research in different stores. Knowing the standard prices of items you buy regularly, and then choosing to buy those items at several different supermarkets, international markets, and big box stores can easily save you a substantial amount. You don’t necessarily have to visit each store; look for sales in advertisements or online, and even then, be adamant about making your own price comparisons. Just because an item is advertised as on sale, it may not be the lowest price available.

"SHOPPING SMARTER"

Shop smarter. Generally, people who try to budget will try to severely limit or abolish shopping for clothing, household items, electronics, and similar purchases. But these types of purchases are necessary and sometimes even pleasurable. So keep shopping, but meet the challenge of rightsizing and shop smarter.

Think about how you spend on clothing and other retail purchases, and then start changing your habits. As with grocery shopping, compare prices between various retail and apparel stores and websites in order to best minimize your expenses. When it comes to products, especially daily necessities, I cannot stress enough the importance of price collation; compare, compare and compare!

The good news is that this is a great time to shop smart. Post-holiday sales are still available, so you should be able to find deeper discounts on items, especially clothing. And for retailers, winter is coming to an end, making this the perfect time to stock up on items you’ll need next winter. You’ll always be able to find discounts for season-specific items if you tackle your shopping at the end of the season. Plan ahead, and recognize the items you need rather than the items you want; this may keep your bank account safe from impulsive shopping. And don’t forget the busiest shopping day of the year: you should consider Black Friday as one of your staple shopping days.

Funds for fun.

There’s no rule that you can’t have fun simply because the markets are tanking. Again, just compare and be smart about how you approach the entertainment part of your lifestyle. For instance, if you enjoy socializing in bars and pubs, head for happy hour to save an average of up to 50% or so on drinks, and perhaps food. Similarly, heading to a movie theater early for the first matinee may save you a bundle on ticket prices. You can also check on deals for movie theaters with local partnerships or your current multichannel video programming distributor such as Time Warner , Comcast , Cablevision , etc. Cablevision has been offering an Optimum Rewards deal where customers can get two free movie tickets to any Clearview Cinema every Tuesday.

At home, you can minimize entertainment costs, starting with television. Complete cable or dish packages will cost more than $100 a month; therefore, cut the expensive movie packages—or cancel the service entirely, if you’re not getting your money’s worth. Consider alternatives such as Netflix and/or Hulu Plus, each of which currently costs $7.99 per month. Amazon.com’s subscription product Amazon Prime ($79 per year, or $39 for students) includes unlimited streaming of your choice of 10,000 movies and TV shows. (Check to ensure your television is compatible, or watch on your computer or tablet.)

Small changes add up to big results. In 2012, you can begin to take control of your expenditures from the money you spend on groceries to the impulse buys at big box stores. And although the advice I’ve given here focuses on small, specific changes, it’s these changes that will form larger good habits that will help you rightsize your finances.

Jeffrey Christakos is President of Westfield Wealth Management. His firm helps individuals and families achieve their lifelong financial goals. Their customized services include strategic planning for tax sensitive clients and diligent investment management. Their website is www.westfieldwealth.com.