A NEW YEAR AND A HEALTHY FINANCIAL SITUATION

 

As originally appeared in the Jerusalem Post, September 29, 2016

“R. Judah son of R. Shalom preached as follows: In the same way as a man’s earnings are determined for him from New Year, so his losses are determined for him from New Year.”   Tractate Baba Batra 10a

Rosh Hashana is right around the corner. Many of us are busy trying to find a few minutes every day to try and improve ourselves spiritually for the coming year.  Whether it’s giving more charity, picking a character trait that we want to work on, this is the time of the year when we tend to focus on these issues. While the spiritual side of things takes precedence we shouldn’t neglect our finances. After all, our financial situation for the upcoming year is set forth on Rosh Hashanah. I am aware that there are other Talmudic and Tannaitic sources which say that our wealth is determined at other times during the year, but the aforementioned quote is generally accepted as the time we are judged on income and losses.

It’s not complicated

I have spent the last few days helping counsel 4 families try and get out of debt and to start living within their means. Talking with my colleague Rachel, we both came to the conclusion that you can sum up personal finance in 9 words. “If you don’t have the money; don’t buy it!”

Many people say that if they made a lot more money they would be able to save or invest, but on their small salary this is not possible. However, there are plenty of people who earn very large salaries, but still land up in overdraft at the end of the month. The reason is that they have absolutely no idea how much money they are spending or exactly where it is going.

The first step in making financial order is to make a budget. When you know what you are actually earning and what your expenses are, you’ll probably be surprised to find that there could be something left at the end of the month.  When creating a budget, make sure that it is realistic, matches your lifestyle and that it leaves plenty of room for extra expenses that seem to pop up regularly (like a broken fridge or child’s glasses). Add a monthly savings goal to the budget.  Although nobody said it’s easy saving on an Israeli salary, as with most things in life, it can be accomplished with hard work.   

In the secular world, it is common practice to make “New Year’s resolutions,” and one of the most popular of these is to lose weight. The key to successfully losing weight is self-discipline, by eating healthier food and limiting consumption, along with following an exercise program.  On the other hand, if a dieter says that he wants to lose 15 kg this year but he doesn’t follow a specific plan, he is more likely to fail. He might lose a few pounds quickly, but if he ends up finishing off a pan of brownies on a Shabbat afternoon, chances are that the extra kilos won’t stay off for long.   Budgeting is the same.  If you create an unrealistic budget, you’ll likely save less than what your budget calls for, become frustrated, and resort to your old ways.   

 

Buy or not?

Every time you are about to make a purchase, you should consider very carefully whether it is really important and if you actually need it. If the item doesn’t fit those criteria, it is better not to buy it. Just because your neighbor decides to make a large purchase or take the family away to a 5-star hotel for all of Sukkot, it doesn’t mean that you need to do the same thing if you can’t afford it. While there is nothing wrong with spending your hard-earned money, it just needs to be done in a responsible manner.

 

Don’t hesitate

The most important advice is just to start.  Start small.  When it comes to doing teshuvah (repentance), we are not expected to become perfect individuals overnight, and we need to start small and work day by day to improve ourselves spiritually. The same idea applies to our finances. You don’t have to wait until you have $250,000 to start. Whether it’s an old IRA that you opened when you were still in the United States, or $30,000 sitting in the bank, just start getting your finances in order.

May we all merit a happy and healthy new year, and a Ketivah v’Chatimah Tovah to all.

 

The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates. Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, FSI. For more information, call (02) 624-0995 visit www.gpsinvestor.com or email aaron@lighthousecapital.co.il.