It’s getting to be that time of year again. The gym will be crowded, alcohol and dessert sales will drop, and you’ll see lots of posts dedicated to our annual tradition of New Year’s resolutions. The problem is that for many, two weeks later we will be back in the same routines.
My goal is to use this article to help you create financial New Year resolutions that you will stick with. I suggest making SMART resolutions for this New Year. That is Specific, Measurable, Achievable, Relevant, and Time-based goals that you will be more likely to accomplish than the generic resolutions we usually use. I am going to look at some normal resolutions and offer SMART alternatives.
Save More
I hear this all the time. I need to save more. More for retirement, more for emergencies, more for vacations, just more. The problem is that the goal of saving more is too generic and can be offset by one event.
Instead, focus on a specific resolution that will just take one action that will grow over time. For example, make it a New Year’s Resolution to save more into your 401(k) plan at work. Then, take the specific action of logging into your 401(k)-plan provider and increase your 401(k) contribution rate. Even increasing that savings rate by 1% will mean that you have fulfilled your resolution! This action will mean that you continue to fulfill that resolution as the new rate will be set in the future. The timing of this around the New Year is timely as many people receive a pay increase in the New Year so you may not even notice a decrease in your take-home pay.
Spend Less
Many use the New Year to try and tighten their belt. They are going to spend less. So, they go a week or so without stopping at the store for unnecessary items. They use coupons for a bit and only buy things on sale. Then a life event happens and it is right back to their regular spending program.
Instead of a resolution to spend less, resolve to be aware of your spending in a non-judgmental way. This takes the pressure off. There are tools available to know what your spending is. If you use a credit card, many will offer an online resource that tracks your monthly spending. Banks will also offer similar tools. Take advantage of that and just note how much you spend each month in a journal or spreadsheet. Do this from a place of curiosity rather than judgment. The knowledge of how much you spend will be very beneficial in your financial planning journey as you can then realistically project what you will need in the future.
Update Investments
As a wealth advisor, this is one I hear all the time from friends, family, and clients. I want to change my investments but first I need to take the time to really sit down, study the market, understand stocks, and then make educated decisions. And of course, this never happens because life is busy, and it takes longer than a couple of minutes at the computer to “understand the markets.” So, at best people will decide to buy a stock that just went on a good run, or they read about in the news.
Instead, resolve to ensure that your investments are aligned with your future goals. Predicting the future is hard, so rather than trying to predict which stocks will go up, make sure your investments are aligned with your goals. If you have money you need in the short term, those dollars should be invested very differently from the money you may need in retirement 20 years from now.
This last one is something we do for our clients all the time. Aligning values, goals, plans, and implementation is what we do as wealth advisors.
The New Year is a time for reflection, a natural time for change, and a time to better position yourself for the future. But making the right resolutions will accomplish a lot more than generic goals. So, when making those resolutions this year take the time to think SMART. And if you need an accountability partner, feel free to reach out!
James T. Cox, CFP®, ChFC®, BFA™, is the Senior Vice President of Advanced Planning at Continuum Wealth Advisors in Saratoga Springs. Continuum Wealth Advisors, LLC is a Registered Investment Advisor registered through the Securities and Exchange Commission.For more information, visit contwealth.com.
