New Year. More Money. Here's How.

Funny how a simple turn of the calendar page is like an instant attitude adjustment: The clock strikes midnight and reboots our drive to get stuff done. Suddenly it seems like it's possible to accomplish anything in the next 365 days if we just put our minds to it.

That feeling lasts about three weeks, give or take a couple of days.

Resolutions HQ is open for business
Well, I say feh on that. This year is going to be different. Really, it is. If one of your New Year's resolutions is to improve your financial standing -- perhaps to save more, plug those money leaks, put your cash to work and make it multiply faster -- then, by golly, we're going to help you get it done.

Between now and Jan. 14, we'll be showing you how to actually put this ambitious plan in action so that at the end of 2011, you can put a big, red check mark beside that finance-related item on your list of resolutions.

That's it for the pep talk. Now let's get down to business.

Three steps to help you ring in a really happy 2012
Instead of getting preachy and overly complex about this, let's do this the easy way: Let's put a savings plan in place, ignore it for months, and revel in our success at the end of 2011.

Step 1: Take a pay cut.
No one puts $20 in their wallet in order to save it. It's there to spend, so spend is what we do.

So your first step toward securing your financial future is to give yourself less money to spend -- starting right now. Here's a simple task to complete in the next couple of minutes:

  • Pick a dollar amount you can bear to part with every paycheck -- don't overthink, just come up with a figure. (Go ahead. We'll wait.) Write it down on this handy Save More Kit.

Step 2: Hide your money from yourself.
As they say, out of sight, out of mind. And so it goes with money.

Spending temptations are everywhere. Don't make everyday dollar decisions harder by weighing whether to get a latte or put that $4.68 into a savings account or an IRA. You've already earmarked money you can bear to part with in Step 1. Now you simply have to put that money somewhere where it's out of reach. The way to do that is to automate, automate, automate. There are several ways to do this.

  • Have your boss take it out of your paycheck: If you have an employer-sponsored retirement plan you're not maxing out, direct more of your paycheck to that account. Even a 2% or 3% increase in contributions will make a huge difference down the line, and you won't miss it in the present.
  • Have your bank suck it out of your checking account the same day (payday) every month and stash it into a separate account that's not accessible by debit card or whining.
  • Same goes for brokerage accounts and mutual funds. We'll show you how to painlessly get started propping up your retirement kitty throughout this series.

Unsure of how much money to put where and in what order? Here are our guidelines for short-, mid- and long-term savings vehicles. Next, it's time to make that money work as hard as it possibly can.

Step 3: Profit.
Words cannot properly convey the power of putting money aside on a regular basis and letting it grow. So here's a visual aide that illustrates how a single $1,200 investment grows over time in four savings scenarios.


Savings Account (0.5%)

Money Market Fund (2%)

Certificate of Deposit (4%)

Stock Market (9%*)

Initial investment $1,200 $1,200 $1,200 $1,200
5 years $1,230 $1,325 $1,460 $1,846
10 years $1,261 $1,463 $1,776 $2,841
20 years $1,326 $1,783 $2,629 $6,725
30 years $1,394 $2,174 $3,892 $15,921
40 years $1,465 $2,650 $5,761 $37,691

*Based on the stock market's historical rate of return.

As you can see, simply socking away one lump sum and leaving it can transform $1,200 into nearly $40,000 over 40 years. Not only have you earned interest, but you've earned interest on your interest. And all you had to do was invest your first paycheck. Thank you, compound interest!

Tinker with this compounding calculator and see for yourself how that figure you chose in Step 1 will grow in different savings scenarios. Don't be surprised if you decide to revisit Step 1 and up the amount of money you're willing to set aside every month.

Stay tuned to throughout the next few weeks for more on how to kick financial butt in 2011.

Dayana Yochim hides everything from herself. Her money, chocolate, the dog's leash, the other sock that goes with this one. Everything but the Fool's disclosure policy-- which is in plain sight -- is around here someplace if you'll just give me a sec to find it.

Read/Post Comments (6) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 27, 2010, at 6:02 PM, xetn wrote:

    Of course this totally disregards the effects of inflation (loss of purchasing power of the money). A look at's cpi (calculated the way it was originally calculated) is currently around 7%.

  • Report this Comment On December 28, 2010, at 12:45 AM, nickictabor wrote:

    Interesting article! Best place to find coupons during holidays for free is "Printapons" I would recommend them

  • Report this Comment On December 28, 2010, at 12:02 PM, jrod87 wrote:

    I like the idea of just paying more in taxes and getting a huge return at the end of the year ^^

  • Report this Comment On December 28, 2010, at 1:32 PM, PeyDaFool wrote:


    Why give the government your money, have them hold onto and earn interest on when you could be the one profiting off your capital?

    From an investing standpoint, it would be better collect the interest on your money, rather than have someone else take it and give it back to you.

    Of course, if you're inclined to spend the money, that's a whole different story and maybe having your tax money kept hostage throughout the year is a better idea.

  • Report this Comment On December 28, 2010, at 2:11 PM, platinum321 wrote:

    Regarding inflation one of the best places to put your money is in precious metals. I am not talking about ETF scams like GLD or SLV I am talking about real silver and gold. They are a hedge against inflation and you own it unlike anything stored electronically. Where one day "poof" it is gone. Silver and gold on hand is the way to go when saving the money and wanting it to hold value. Get rid of the FED and back to the Gold standard! The world right now is 100% FIAT. That is what I call friggin SCARY!!

  • Report this Comment On December 28, 2010, at 3:56 PM, PeyDaFool wrote:


    Besides being shiny and nice to look at, is your gold stash paying out any dividends? Are you reinvesting anything the gold is providing? How is the historical return when compared to the historical return of the stock market?

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