3 Investing Resolutions for 2013 (and How to Make Them Stick)

January is generally seen as a time of renewal, recommitment and change. We enter the new year with the best of intentions, and sometimes even act on them for a little while. The gym is packed, nobody will touch dessert, and we vow that this is finally going to be the year that we get our financial house in order.

Yet, slowly but surely, our resolve falters. To understand why, evaluate how the mind works when it comes to achieving goals. It's a constant war between our advanced mind (the prefrontal cortex, mainly) and what I call our "monkey brain," comprised predominantly of the limbic system. The monkey brain likes gratification now and doesn't really care about the future. If it ran the show, you'd spend every paycheck as soon as possible, max out your credit cards and assume the future would take care of itself.

Our monkey brain loves new year's resolutions! They're a promise to do something unpleasant later; an opportunity to tell yourself that you're going to change your behavior without actually changing it. You avoid triggering the pain centers in your brain and everyone is happy, except, of course, your future self who is left to deal with the consequences of your actions and inactions.

So, before we get to the task of setting new goals, we have to understand how to make them stick. A study by professors Dilip Soman and Min Zhao of the University of Toronto shows that when we set multiple savings goals, we tend to be distracted and scatter our efforts between them, decreasing the likelihood of reaching any at all. Instead, focus on one saving or investment goal at a time. Achievement of each builds momentum and increases our positive mindset about the next. After all, it's better to achieve one goal than to fail at many.

The second part of making a goal stick is creating a habit and measuring your progress. Nike created one of the largest experiments in the fitness world with its Nike+ app. Some 1.2 million people signed up, and Nike discovered that there were two key factors in getting people to commit to regular exercise. The first was actually exercising five times. The number five seemed to be the tipping point for getting a habit to stick. The other requirement was measuring personal data. People who checked how they were doing (how far they were running, or how fast) got hooked into seeing their progress and striving to do that much better.

With that in mind, here are three investing resolutions in a specific order so that you can tackle reasonable goals, and achieve them before moving on to bigger tasks.

Rebalance your investment portfolio. This is not meant to be a time-consuming exercise. I use the rule of thumb of "110 minus your age" to determine the percent of your portfolio which should be in equities versus bonds (though if you're retired, you may not need bonds). I use basic index funds across a few classes and don't overcomplicate things. As Professor David Swensen of Yale notes in Unconventional Success: A Fundamental Approach to Personal Investment, proper rebalancing can add 0.4 percent to your annual returns.

What about the uncertainties (the fiscal cliff, uncertain dividend taxes, the rise of China, debt in Spain)? All of these tempt you to react to the news and invest to counteract whatever is getting financial gurus frothy. Yet, actively managed funds--the ones which are supposed to be taking all of this into account in their investing strategies--consistently underperform index funds. Sometimes simplicity is beautiful.

How to make this work: Write out an invitation to your spouse to join you for your annual rebalancing. Pick a date and put it in the calendar. Then sign it at the top. This is key. As Duke's Dan Ariely points out, you're more likely to commit to something when you sign at the top of the document. Then, on the appointed date, do it. Make it fun. Reward yourself with a glass of wine or a favorite snack to make it enjoyable. You want to include your spouse because it's important that both of you know what the investing game plan is in case one of you gets hit by the beer truck. Plus, the more numerate the couple is, the better they tend to perform financially.

Check your credit report for free. Don't fall for the guys with the band singing the song about credit reports and wind up paying to get some credit monitoring service. Go to annualcreditreport.com and get a free credit report. You're looking for discrepancies, late payments, and identity theft. If you find something wrong, dispute it. If there's a ding against your credit, work to fix it by paying off your debt and paying your bills on time. Improving your credit score can make you eligible for lower interest rates on your debts. Lower interest rates on your debts frees up more money for you to invest.

How to make this work: Again, set a date, sign a plan with your spouse and follow through. This might take a little bit longer because you need to check scores from several credit reporting agencies, and cleaning up any negatives will take a little while (though don't pay for a credit repair agency to "clean up your credit." The only thing they clean is cleaning out your wallet).

If you do this in January, that's two wins under your belt, and you'll be ready for a bigger goal. Here's a third:

Increase contributions to retirement plans. As Scott Holsopple recently pointed out, 401(k) investment contributions increased to $17,500 in 2013. The IRA contribution limit has increased to $5,500. If you're not maxing out your contributions already, then going from current contributions to maximum contributions may cause quite a shock to your system and keep you from committing to the plan long term.

How to make this work: If you are eligible to contribute to a 401(k) plan and your plan sponsor offers it, use automated options to slowly increase your contributions. If not, submit paperwork to change your contribution every three months, increasing it a little each time. If your retirement savings options consist of an IRA, set up automatic contributions so that every three months you're increasing the amount you put in. Also, set up the contribution to occur a few days after the first of the month, and set a calendar reminder on the last Sunday of the month prior to remind yourself that a withdrawal is coming, and that you need money in your account to cover those contributions. By taking this slow, incrementally increasing approach, you're utilizing a psychological phenomenon called hedonic adaptation to your benefit. Usually, hedonic adaptation is negative. You get a new car, but then want a new convertible, for example. It also works in reverse. In a short time, you'll adjusted to having a little less spare cash in the bank.

The third resolution may take all of 2013 to implement, but by this time in 2014, you'll be in better financial shape than you were when you made the resolutions, and you'll have pulled a fast one on your monkey brain at the same time.

Jason Hull is a candidate for the CFP(R) Board's certification, is a Series 65 securities license holder, and owns Hull Financial Planning.



More From US News & World Report

--

Get stories like this on the Yahoo app and discover more every day.
Download it now.
Loading...
  • US stocks flat as oil shares pressured AFP - 6 minutes ago

    Petroleum-linked shares retreated Wednesday ahead of a US oil inventory report as Wall Street stocks opened little-changed in sluggish trade. Shares of Dow members ExxonMobil and Chevron dipped with oil ... … More »

  • Markets Right Now: US stocks open lower Associated Press - 7 minutes ago

    The latest on developments in global financial markets (all times local): 9:35 a.m. Stocks are opening slightly lower on Wall Street as the market gives back a modest gain from the day before. Mining and ... … More »

  • Wall Street opens little changed as investors eye Fed
    Wall Street opens little changed as investors eye Fed Reuters - 17 minutes ago

    REUTERS - U.S. stocks were little changed at the open on Wednesday as investors kept up their wait for Federal Reserve Chair Janet Yellen's speech on Friday for clues on the timing of an interest rate ... … More »

  • Iran yet to decide on OPEC limits: ministry source AFP - 28 minutes ago

    Iran has yet to take any decision on whether to set a ceiling on oil production or take part in a planned OPEC meeting in Algeria, an oil ministry source told AFP Wednesday. "It is too early to talk ... … More »

  • Cnooc Posts 1st Half-Year Loss on Canadian Oil Sands Charge (3) Bloomberg - 51 minutes ago

    Prices have whipsawed this year, flipping five times between bear and bull markets, as production from nations outside the Organization of Petroleum Exporting Countries, including China and the U.S., declines in the wake of a price crash that began … More »

  • EU warns Greece statistics row 'dangerous' for bailout Reuters - 1 hour 16 minutes ago

    BRUSSELS/ATHENS (Reuters) - The European Union called on Greece on Wednesday to quash what Brussels said were false accusations the Greek statistics agency rigged data to help foreign creditors and warned that the row posed risks to Athens' current … More »

  • Glencore’s Worst Profit Shows Miners Still Reeling From Crisis Bloomberg - 1 hour 17 minutes ago

    Weak raw-material prices caused profit at the commodities giant to plunge 66 percent in the first half to $300 million. The shares slumped as much as 6 percent in London, the most in two months, even as Glencore promised to cut debt even further … More »

  • New trade deal with Britain may take time, Norwegian minister says Reuters - 1 hour 41 minutes ago

    Norway wants to maintain a good relationship with Britain after it leaves the European Union but it may take a long time for a new trade agreement to be established, the EU affairs minister in Oslo said on Wednesday. Elisabeth Aspaker told a … More »

  • Qatari state fund buys stake in NY's Empire State Building
    Qatari state fund buys stake in NY's Empire State Building Associated Press - 1 hour 43 minutes ago

    Qatar's sovereign wealth fund has made an iconic purchase in America — a stake in the company that owns New York's Empire State Building. The $622-million purchase by the Qatar Investment Authority comes ... … More »

  • European stocks rebound as euro slips, U.S. curve flattens
    European stocks rebound as euro slips, U.S. curve flattens Reuters - 1 hour 46 minutes ago

    European stocks edged towards consecutive daily gains for the first time in three weeks on Wednesday, drawing support from a weak euro as investors moved to price in a U.S. interest rate rise, boosting the dollar. The earlier mood was more … More »

  • WPP sees signs of post-Brexit recovery in British ad market
    WPP sees signs of post-Brexit recovery in British ad market Reuters - 1 hour 49 minutes ago

    WPP (WPP.L), the world's largest advertising group, reported a better than expected jump in first-half net sales and said its British operations showed signs in July of a "post-Brexit recovery", sending its shares to a record high. Run by … More »

  • Gold steady as investors await U.S. rate clues
    Gold steady as investors await U.S. rate clues Reuters - 1 hour 50 minutes ago

    Gold held steady on Wednesday as investors took to the sidelines ahead of a speech by Federal Reserve Chair Janet Yellen this weekend which will be closely watched for further clues on U.S. interest rate policy. Yellen is scheduled to address a … More »

  • Exclusive - German ratings firm Scope seeks ECB recognition Reuters - 1 hour 51 minutes ago

    German rating firm Scope says it is in talks to become one of the European Central Bank's recognised sovereign credit agencies, though tough requirements mean the process could take at least three years. Scope would become the first agency based in … More »

  • Oil prices drop as market tracks US supplies AFP - 1 hour 51 minutes ago

    Oil prices fell Wednesday, with Brent stuck below $50, after data showed an increase in US crude stockpiles, adding to supply glut concerns. Data from the American Petroleum Institute (API) Tuesday showed ... … More »

  • U.S. oil falls 2 percent on surprise build in crude stocks
    U.S. oil falls 2 percent on surprise build in crude stocks Reuters - 1 hour 55 minutes ago

    U.S. oil prices fell more than 2 percent on Wednesday on an unexpected increase in U.S. crude stocks that revived worries about the supply glut that has capped prices for the past two years. Industry data from the American Petroleum Institute (API) … More »

  • U.S. oil falls 2 pct on surprise build in crude stocks
    U.S. oil falls 2 pct on surprise build in crude stocks Reuters - 2 hours 2 minutes ago

    U.S. oil prices fell more than 2 percent on Wednesday on an unexpected increase in U.S. crude stocks that revived worries about the supply glut that has capped prices for the past two years. Industry data from the American Petroleum Institute (API) … More »

  • Buba's Dombret says eyes LSE-Deutsche Boerse merger with some concern Reuters - 2 hours 21 minutes ago

    Bundesbank board member Andreas Dombret said he was concerned the planned $29 billion (21.89 billion pounds) merger between German exchange operator Deutsche Boerse and the London Stock Exchange may raise systemic risks in derivatives clearing. … More »

  • PetroChina profit almost wiped out in first half
    PetroChina profit almost wiped out in first half AFP News - 2 hours 25 minutes ago

    China’s biggest oil producer PetroChina's net profit plunged 97.9 percent in the first half of this year, it said Wednesday, as it struggled with a weak domestic economy and low oil prices. Net profit was 531 million yuan ($79.9 million) in the … More »

  • European equities mainly rise on German GDP
    European equities mainly rise on German GDP AFP News - 2 hours 28 minutes ago

    European stock markets mostly rose on Wednesday, shrugging off a largely downbeat session in Asia, with sentiment partly lifted by German economic growth data. Strong foreign trade and buoyant consumption drove Germany's economy, Europe's largest, … More »

  • Malaysian oil service provider Perisai in talks with bondholders Reuters - 2 hours 34 minutes ago

    Malaysian oil and gas service provider Perisai Petroleum Teknologi on Wednesday said it has started talks with holders of its S$125 million ($92.36 million) bond maturing on Oct. 3. Perisai said its interest cover ratio had fallen below the … More »

  • Angry Birds maker Rovio turns a profit, plans movie sequel
    Angry Birds maker Rovio turns a profit, plans movie sequel Reuters - 2 hours 36 minutes ago

    Finnish mobile game and animation maker Rovio Entertainment Ltd said on Wednesday it made a profit in the first half of the year and was planning a sequel to its successful Angry Birds Movie. Rovio's adjusted operating profit in the first six … More »

  • Philippines' Duterte says willing to allow online gambling resumption Reuters - 2 hours 38 minutes ago

    Philippine President Rodrigo Duterte said on Wednesday he's willing to allow a resumption of online gambling in the Southeast Asian nation if correct taxes are paid and gaming parlours are far from schools and churches. The new president added … More »

  • German banks right to charge for accounts - Bundesbank's Dombret Reuters - 2 hours 47 minutes ago

    German banks are right to consider current account fees to counter low central bank rates, but an outright charge on deposits, as pioneered by a few lenders, is unlikely to become common, Bundesbank board member Andreas Dombret told Reuters. While … More »

  • EU, Portugal agree on recapitalisation for bank CGD Reuters - 3 hours ago

    The European Commission said it had reached an agreement in principle with Portugal over the recapitalisation on market terms of Portuguese state-owned bank Caixa Geral de Depositos - the country's largest lender. Under the terms of the deal, … More »

  • EU says Greek debt statistics not manipulated in 2010-2015
    EU says Greek debt statistics not manipulated in 2010-2015 Reuters - 3 hours ago

    The European Union's Employment Commissioner Marianne Thyssen said on Wednesday the Greek statistics office did not manipulate data on the country's debt in 2010-2015 and that she had sent a letter to Athens asking it to refute any such suggestions. … More »

 
Recent Quotes
Symbol Price Change % Chg 
Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
You need to enable your browser cookies to view your most recent quotes.
 
Sign-in to view quotes in your portfolios.

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    0.1290.0000.00%
    N21.SI
    0.250.00-1.96%
    5ME.SI
    0.60+0.04+6.57%
    5TP.SI
    0.99-0.02-1.98%
    Y92.SI
    0.156+0.007+4.70%
    AFC.SI
  • % Gainers
    % Gainers
    NamePriceChange% Chg
    0.30+0.06+22.45%
    T18.SI
    0.15+0.02+15.38%
    5TI.SI
    0.225+0.025+12.50%
    Y35.SI
    0.51+0.05+12.09%
    BHU.SI
    0.162+0.017+11.72%
    QS9.SI
  • % Losers
    % Losers
    NamePriceChange% Chg
    0.011-0.115-91.27%
    QF6.SI
    0.23-0.17-42.50%
    AWI.SI
    0.205-0.055-21.15%
    I06.SI
    0.45-0.10-18.18%
    BFK.SI
    0.385-0.085-18.09%
    E8Z.SI

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    1.3539+0.0027+0.20%
    USDSGD=X
    1.5256-0.0014-0.09%
    EURSGD=X
    1.7941+0.0114+0.64%
    GBPSGD=X
    74.0990-0.01-0.01%
    SGDJPY=X
    5.7242-0.0113-0.20%
    SGDHKD=X
    2.9829+0.0071+0.24%
    SGDMYR=X
    9,783.5176-33.1865-0.34%
    SGDIDR=X
    4.9142+0.0008+0.02%
    SGDCNY=X
    1.0327+0.0038+0.37%
    AUDSGD=X
  • Commodities
    Commodities
    NamePriceChange% Chg
    1,332.30-13.80-1.03%
    GCZ16.CMX
    18.63-0.29-1.54%
    SIU16.CMX
    101.29-2.60-2.50%
    ^XAU
    2.10-0.02-0.73%
    HGU16.CMX
    47.57-0.53-1.10%
    CLV16.NYM
  • Bonds
    Bonds
    TreasuryYield (%)Yield Change
    1.13-0.01
    ^FVX
    1.550.00
    ^TNX
    2.240.00
    ^TYX