Have you Defined Your Financial Goals for the New Year?
This material was prepared for Randy Neumann Wealth Management.
It is that time of the year when we wind up one year and start another, and for most of us, money is definitely on the mind. A new year is always a time for financial renewal. If you failed to hit your targets in the past twelve months, this is the time to reflect, set new targets and regroup.
New year resolutions are often focused on health and wealth. Most of us want to be fit and healthy both physically and financially as we enter a new year. We want to figure out how to meet our health goals and improve our finances. Yet, figuring this out is not always easy. It takes willpower and planning to steer our finances in the right direction.
You might make a difference by changing how you develop your New Year resolutions. What are you doing right? What are you getting wrong? Before you set new resolutions, perhaps review the previous year to identify problem areas and obstacles that prevented you from meeting your resolutions.
We’ll leave the physical health part up to you, your doctor and your gym. For the new year, here are some ideas to help develop actionable financial resolutions:
Step 1: Carry Out a Diagnosis of Your Finances
People who understand their finances are generally in a better position to make more prudent financial decisions. Good insight leads to greater prudence in financial management. Before the year closes, take time to carry out a financial audit. This is the time to look at your credit reports, expenses, debts, loans and other financial obligations and determine how these are affecting your current financial health. Doing this can help you identify potential errors in your finances that could be hindering you from attaining your financial goals.
Step 2: Set Out Some Clear Financial Goals
Start by having a “financial lighthouse” to point you in the direction that you want your finances to take. Once you have a goal, it is easy to set clear milestones and define the means with which you will hit these milestones. Don’t just have the intention; have a plan. One way to realize your goals is by employing a strategy of goal-setting that divides your goals into milestones and assigns a timeline to each milestone. This modular approach breaks up a seemingly impossible goal into manageable milestones that might seem less intimidating. Often, the biggest obstacle to realizing financial goals is a psychological one. Once you are able to overcome the psychological barrier, it is easier to work with some discipline towards the attainment of your goals.
Step 3: Debt must be a Priority
It’s important to create a New Year financial resolution by including factoring in your debts. Debts cannot be ignored, and, as an integral part of your finances should be a priority. As part of the diagnosis in step one above, identify the bad debts that are weighing down your finances and credit profile and create a debt management strategy. Clearing your debts will allow you to focus on the financial obligations that boost your financial health such as savings and investments.
Step 4: Create a Saving Target
Setting aside a random sum for a piggy bank is generally a thoughtful gesture and with some consistency, can help you build a good nest egg. However, the best money-saving strategy is generally one that is goal-oriented. Be methodical about this. Set a definite target and the duration within which you want to hit your target. You can subsequently calculate the amount of money that you will need to save to hit that target.
Take time to work out your savings target. Why do you want that target within that time period? Maybe you want to plan a dream vacation, buy property, or a second home. Once you have an idea of how much you’ll need, you can do a lifestyle costing. This will involve budgeting afresh so that your new budget for the new year can meet your money saving goals. It may involve squeezing a few expenses here and there, or allocating some changes is your wealth management plan.
Step 5: Automate Your Financial Management
These days of having technology at our fingertips make obtaining information even easier than ever before. If you have not tried using technology for your financial management before, you may want to explore using it in the New Year. Banks, credit unions, and other financial providers have websites and/or apps to easily access your information.
Step 6: Hire a Financial Expert
Contrary to popular belief, financial management does not cost an arm and a leg. If you have been struggling year after year to stay on top of your finances in spite of your best intentions, it is time to bring in a partner to assist you with your finances. A Wealth Manager can help you put your finances in order and organize a financial portfolio that syncs with your lifestyle and goals.
Step 7: Increase Your Financial Literacy
We all have gut instincts when it comes to money management but some people’s “instincts” seem to be better than ours? What gives is the level of financial literacy. Devote some time in 2018 to learn more about money management. A Wealth Manager can help educate you and fight for your financial future.
For more information on increasing your financial literacy, contact us today!