BBC Capital

Cures and remedies for last year’s financial hangover

  • Looking ahead

    The worst kind of New Year hangover is the one you can't cure with hair-of-the-dog: It's the financial hangover. You threw caution to the winds (or your credit cards at the sales assistants) and now you're staring at the bills.

    If that sinking feeling spurs you to improve your financial position in 2014, then your 2013 binges will have served a good purpose.

    Adopting better financial habits starts with changing the way you think. Step away from instant gratification, and get in the habit of weighing all finance-related decisions. That means considering the pros and cons of each choice in terms of money and happiness, prioritising and then weighing the present against the future.

    In 2014, look to change not only your habits, but your mindset. Here are a handful of tools and ideas to help you on the road to a happier, financially healthier new year. (Photo credit: Thinkstock)

  • Organise

    CHANGE YOUR HABITS: As you create your new financial persona, think of your myriad documents as the raw material. Step one is to sort through them. If you've been struggling with the same all-in-one photocopier/scanner/printer for several years, you might not have realised that mobile scanners have taken a big leap forward. From US retailers for $100 to $200, you can buy a scanner the size of a fat magic wand — and if you use it, it may have a similar effect on your finances.

    Machines from companies such as Japan-based Brother work either by scanning documents you feed into them, or by scanning as you wave them over documents. Bestbuy.com ships portable scanners internationally. To organise non-scanned documents, consider erasable binder clips, like those from PileSmart, available in a set for $4 at Amazon, or erasable magnetic labels, available for under $10 at The Container Store. Both retailers ship internationally.

    "Set aside four blocks of six hours (to organise your documents)," suggested Vicki Norris, an Oregon-based organising expert.

    CHANGE YOUR MINDSET: Services such as Mint.com help organise your spending by giving you a bird's eye view of all your accounts, including your bank accounts and credit cards. Mint links users to more than 20,000 banks, credit cards, loan and investment accounts in the United States and Canada. A spokeswoman said by email that Mint has helped users create more than 6 million goals and save $40 billion. If you want to go one step further, services from online companies such as California-based MoneyStream will organise all of your accounts and help you pay bills. (Photo: Brother DS-920dw mobile scanner)

  • Save

    CHANGE YOUR HABITS: Several new sites offer ways to earn cash back on purchases, including BeFrugal.com, Mr.Rebates and Shopathome.com. After you've earned a certain amount, sites will send you a cheque or drop the earnings into your account.

    "It's literally free money," said Roger Ma, 31, a New York-based digital media professional and personal finance blogger who uses many of them. "It's one easy step you can take when you're doing online shopping." The sites mainly offer rebates on purchases made from big US-based retailers, which means shipping costs are higher if you live elsewhere. The average shopper outside the US spends $300 per order, compared with $100 for US-based shoppers, said Jon Lal, 45, founder of Massachussetts-based Befrugal.com. A quarter of the site's shopping is by people outside the US. (Photo credit: Thinkstock)

    CHANGE YOUR MINDSET: Befrugal.com and other apps offer financial tools that allow you to weigh your spending and savings decisions. Ma, for instance, used a "drive or fly" tool to help him decide whether to take a plane or drive to a wedding. The car won: it was cheaper by $300 and equal on time.

    The Center for Retirement Research at Boston University offers a [free interactive program]( : http://crr.bc.edu/special-projects/interactive-tools/target-your-retirement/) to help US investors decide how much they need to save for retirement.. The Australian government offers similar tools .

    The surprising conclusion from many financial tools is how much you can benefit from saving. The tools, however, can't account for your pleasure, or even trickier, the preferences of the people around you. Sometimes you need a good old-fashioned conversation.

  • Teach

    Part of turning over a new financial leaf means helping your children learn that they reap what they sow: Good financial habits instilled early will pay off for both you and them. So how do you teach them?

    CHANGE YOUR HABITS: Discussing money in the language your children speak — play — will make a difference. Investor Warren Buffet has distilled his financial wisdom into a series of learning tools and games called The Secret Millionaires Club. Some are free, but for $20, you can download a business-in-a-box (what else — a lemonade stand) from Amazon.com, which ships internationally. A DVD with episodes of an animated series that features financial and entrepreneurial lessons is about $13. If your approach is a little more old-school, you probably can't beat Hasbro's board game Monopoly, available in 111 countries, in 43 languages. The most coveted property space in the US English-language version is Boardwalk; in the UK its Mayfair while in Spain, it is named “Paseo del Prado” and in France, “Rue de la Paix."

    "What remains constant (in all versions of the classic game) is that you are buying, selling, paying bills, and even paying taxes," wrote New York City-based Laurie Schacht also known as the Toy Insider Mom, in an email to BBC Capital. The latest version is Empire, available at Amazon. It allows kids to buy and sell brands including Xbox, Coca-Cola and Samsung.

    CHANGE YOUR MINDSET: Parents often reach for something to buy when they want to impart a lesson to their children, but the most important way to instruct your children is by example, said John Bogle, founder of Vanguard Group.

    If you have good financial habits and show kids you are able to delay gratification, they will notice. If you need a little help in that department yourself, you can always resort to a kitchen safe. For $45, you can buy a safe, set the timer, and lock your credit cards away. (Photo credit: Thinkstock)

  • Invest

    CHANGE YOUR HABITS: Getting your investments on autopilot is probably easier than you think, thanks to new web-based investing services. In the UK, London-based company Nutmeg, for one, offers low-cost, basic investment services. It has 20,000 users around the world so far and offers 10 basic investment strategies. Services typically ask you to pick a risk level and time frame, and set a schedule of regular deposits. California-based Wealthfront and New York-based Betterment offer similar services for US-based investors.

    CHANGE YOUR MINDSET: If you consider your investments as products like any other, you’ll make better decisions about how much to pay for them. The first step is figuring how much you are shelling-out — that's tougher than you think, because many fees are hidden in investment funds' fine print. "People are surprised to find they're paying any fee at all," said Bo Lu, chief executive officer of California-based FutureAdvisor. "If they didn't swipe a credit card, they don't know they're paying." FutureAdvisor, available in the US, offers investment management services and a free service that will survey your investments and calculate how much you are paying in investment fees. Households that invest in mutual funds are probably paying more than $1,000 a year in these fees. This money is skimmed from the top of your returns and over the life of your investments, can make a huge difference. (Photo credit: Thinkstock)

  • Learn

    CHANGE YOUR HABITS: You probably already have a small pile of personal finance books sitting in your house. Open them. Managing your money is like any skill. You need to brush up once in a while. A few US classics are A Random Walk Down Wall Street, by Princeton University economist Burt Malkiel, and The Intelligent Investor, by Benjamin Graham, Warren Buffett and Jason Zweig. A newer personal finance book that is garnering kudos is Guy Fraser-Sampson's No Fear Finance.

    CHANGE YOUR MINDSET: Making sure your new habits stick probably means understanding why you developed the old, bad ones. Consider Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard Thaler and Cass Sunstein to understand more about the emerging field of behavioural economics. (Photo credit: Thinkstock)