That time of year again- where the organic produce shelves are empty and the gyms are full. There is something about the promise of a New Year and all the potential it brings that makes people feel their most ambitious.
"What is your resolution" may be one of the most common questions every January, and for most people their resolutions are the same ones they had last year that they didn't accomplish. Maybe they didn't accomplish these not due to a lack of trying, but maybe because they weren't mindful when picking and choosing their resolutions? In 2022, I resolve to encourage people to pick resolutions that are attainable and manageable for their lifestyle, especially when it comes to financial goals. Too often I speak with my clients who's goals are beyond the scope of reason, like to cut their monthly expenses in half, or pay off a huge debt before February. I am so enthusiastic about these goals, as they are, but what happens if the goals are not achieved is a lingering feeling of failure, and a rapid de-motivation in their drive to make better financial decisions.
- When you are making your financial resolutions for 2022, here's a couple of things to consider:Where do I want to be financially this time next year (not next month)?
- Within my current financial circumstances, what are 3 small, manageable changes I can make to get myself closer to that goal?
- What are reasonable measures of success I can check in on throughout the year to see how I am progressing?
Keep in mind, it's a New Year's Resolution, not a new January's Resolutions. If you are setting goals that take time to accomplish, make sure you are giving yourself adequate time to hit those goals before you feel discouraged. Or, set goals that are easier and quicker to accomplish. I love a resolution that is low-effort and big-impact to the relationship my client's have with their money.
Still stuck on what goal to set? I've come up with 8 financial resolutions you can choose from that are manageable, attainable, and hugely beneficial to your financial life.
- Schedule a Money Date with yourself once a month to check in on things. Take a look at your bank balances and spending for the prior month. Were you above budget or under budget? Did you spend more than you wanted to, and if so, was this a one off month, or was there extenuating circumstances that caused you to over spend? How about your investments: did you contribute last month, or should you have? Should you visit with your investment advisor to review your allocations or has anything changed for you? How was your debt usage- did you make the necessary payments to your credit cards or loans? These are a few of the things to check in on, and once a month is a great frequency to get started with.
- Increase your monthly contributions to your retirement accounts and investments. Once you've taken a look at your budget for the year and any potential increases to your income for the year, it's a good idea to make little bumps to your current automatic contributions. Even if it's by a little- we all know a little goes a long way. Can you spare an extra $10 a month towards these long-term investments?
- Plan out your major expenses for the year. Have you taken a look at your 2022 plans? Do you have a big trip planned for the summer (hello San Diego) or do you think you may need a down payment for a new car in August? Reverse engineer the expense: how much would you need to save over the next 6 months to be ready for that purchase or that trip. Doing this and building that expense into your monthly budget now allows you to avoid putting these kinds of expenses on credit and having to pay for them after the fact with added interest. Bonus: once you've made that purchase, you have extra allocated money each month to use towards another future expense or to invest!
- Build a debt-payoff model within your current monthly budget. There are tons of free resources online to build a debt payoff model. You can download a sample spreadsheet and plug in your existing credit cards and debt, and your monthly budget to pay these off, and it will help you navigate towards an affordable and inspirational plan to tackle these obligations. Don't overextend your monthly budget when building this, make sure it is a plan you can stick with through the year.
- Assess and build up your emergency fund. Do you have enough saved for emergencies? Statistics say that a single individual should have 3 months of their mandatory living expenses in a liquid savings account, and for a couple it should be 6 months worth! Spend some time and find out what this number is for you. Do you have enough? If not, how much can you save monthly to get yourself there as soon as possible? Do you have WAY more than that? Look into other ways to save that may have a higher return than a traditional savings account.
- Unsubscribe from recurring expenses or services you just aren't using anymore. This one is HUGE! In the past, I've met with clients that were unknowingly spending hundreds of dollars a month on subscription services they forgot about or just completely weren't using but hadn't canceled. Take a census of your recurring expenses and see which of them are bringing you joy, and which you wouldn't even notice are gone, and cut those from your budget. Bonus points if you can re-allocate those monthly dollars towards one of your other financial goals!
- Create a monthly "flex" budget. This is a budget not allocated to anything in particular each month. Look at your income minus your fixed expenses and what you are saving a month. From what is left over, think about how much of that amount you'd like to be able to have each month for guilt-free spending, and try to stick to that amount when it comes to the little things, like an extra few Starbucks runs, or going out for a fabulous dinner with your friends. This allows you to have some grace within your budget while still focusing on your financial goals.
- Research and learn about a new investment. Is there an investment you've been hearing a lot about? Are you wanting to get more into buying individual stocks, or setting up an automatic investment plan into a mutual fund? This could be your year. Take some time to research into something you are excited about through credible financial websites, or contact your Financial Advisor to get their take on a new investment that you'd like to understand better.
If you have a different financial resolution you are excited about, I am thrilled about that journey you are taking this year. But if you are stuck looking for a few simple goals to set for yourself, any of the above can help you get on the right track. Getting started this early in the year will help you be in a money mindset, and who knows, by 2023 you could already be right where you'd like to see yourself.