Seasonal Weight Gain

The holidays are upon us yet again, a time of year filled with friends, family, celebrations and an abundance of food. The end result? The average American will gain approximately eight pounds between now and New Year’s Day.

Unfortunately, there is another type of weight gain that also happens this time of year, one as difficult to shed as those extra holiday pounds. I’m talking about the additional weight added to our credit card balances as we party our way through the holidays.

We all know that preventing weight gain isn’t exactly rocket science. To keep off the extra pounds, we know we should exercise more and watch what we eat. Financial weight gain is no different – we need to save a little more and spend just a little less.

So how do we prevent added financial “weight” on our credit cards? Like exercise, it’s all about discipline. Some of you may remember the old “Christmas Club” accounts that local banks once offered. The truth is there was nothing magical about these ventures, they were simply forced savings accounts. By saving a little each month, come December you had a lump-sum of money to buy holiday gifts with. A similar approach will help you avoid credit card shock next year. Here it is, in seven and a half* steps.

1.	In January, after all the dust has settled, your credit card statements have arrived, and you’ve regained consciousness after the shock of your increased card balances, add up what you spent on gifts, decorations and entertaining.
2.	Adjust the number from Step 1 up (or down) based on what you would like to spend next Christmas. This is your target for next year.
3.	Divide next year’s target number by 12 to calculate how much you need to set aside each month to reach your target.
4.	Establish a separate savings account specifically designated for holiday expenses.
5.	If you are an employee, have your human resources department set up a direct deposit for the amount you came up with in Step 3. If you are self employed, simply direct-deposit from your checking account yourself. We find that most people, after a few weeks, don’t notice the money that’s being diverted into the savings account.
6.	Now, the tricky part: Stick to your budget you established in Step 2.
7.	Pay your credit card bills IN FULL when they arrive in January.
*7½.	The added benefit of this approach is: With your seasonal financial weight under control, you can spend more time at the gym.

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Supreme Court Allows Individuals to Sue Their 401(k) Plan

Yesterday, the Supreme Court unanimously voted to allow individuals to sue their 401(k) plan administrators for mistakes made in administering their plan. Until this ruling, individuals were only allowed to sue their 401(k) plan administrator on behalf of all plan participants, essentially in cases where the administrator absconded with plan funds.

So what does this really mean for your 401(k) plan? The general outcome is unknown, but what is certain is that it will lead to more litigation aimed at 401(k)’s. In essence this ruling allows people to sue if their plan administrator breaches their fiduciary responsibility. The question really is, what falls under that responsibility? Is it merely, as in this particular case, moving the funds around as requested by the participant, or will it encompass other things like the number of fund choices available, the overall costs of the plan, the default investment choices and any one of the myriad options a plan provider must consider? Only a string of litigated cases will start to define the scope of this ruling.

The fear is that small employers, already struggling to pay for plans, will simply decide that the potential cost of defending cases will simply cause them to eliminate the plans altogether. Others think that the costs of the plans will increase to cover the cost of potential future litigation.

We’ll keep you posted as this thing plays itself out.