While there is no rule set in stone that all goals must be made by January 1, there is something about starting a new year with a clean slate. Many people make some sort of New Year’s resolution around money. Most are forgotten by January 2. Let’s make 2014 the year where you keep your resolution to take back control of your finances.
4 Smart Ways to Take Control of Your Financial Lives this Year
I fully believe within all of us exists a person who wants to own their financial lives. At the same time, we are also creatures of habit who will resist (sometimes even unconsciously) making the necessary changes. Before you begin, you must identify your pockets of resistance and address them now. Otherwise it will be much harder to achieve your goals.
1. Set Realistic Goals and Regularly Review Them
I love goal-setting. Dreaming about what I want to accomplish is a lot of fun. Most people enjoy identifying their goals but then stop there. While dreaming is an important step, it’s not the only one you need to take.
- Identify Your Goals: What do you want to accomplish this year and long-term? Your goals should be realistic but also a bit of a stretch. Feeling a sliver of pressure to achieve them keeps you focused and motivated. Be sure to write your goals down and ideally place your them somewhere visible.
- Create and Execute Your Plan: Once you know your goals, figure out the steps you need to take to achieve them. Be very specific and set reasonable deadlines to complete individual steps. One of the biggest mistakes I see is people don’t create specific action steps and spend a lot of time on activities that don’t move them forward. Or worse—take no action. It won’t happen on its own.
- Review and Reassess Your Goals Regularly: I encourage you to review your goals quarterly. Make sure your actions are driving the results you want. You may need to do some course correction or you may even find you need to fine-tune your goals a bit.
Success Tip: Be sure to share your goals with your family and get their buy-in. It’s much easier to reach goals when your family is working together to achieve a common goal(s). It also makes it much easier for kids (and adults too) when money has a purpose, and can be used to weigh against things they find at the store. Use this as an opportunity to demonstrate good financial behavior to your kids.
2. Learn to Live Within Your Means
The only way you can accurately do this is by following a budget. Budgets may be a dirty word in some households, but it’s time to let go of old beliefs and develop a budget mindset. Budgets don’t have to mean deprivation and can instead represent freedom. It begins by knowing how much money comes in and goes out. If you find your spending more than you make, you need to make some decisions on what stays and what you eliminate. Start with the low-hanging fruit first, such as canceling a gym membership you haven’t used in two years and go from there. Once your budget is under control, you can chose how to spend your discretionary money on the things that matter most to you without creating new debt.
3. Eliminate Consumer Debt
This is always a popular goal and an incredibly worthy one too. It is also a hard one because you have most likely become accustomed to a lifestyle of saying “yes” to everything you want. No one likes to feel deprived and when you’re eliminating debt, it may feel like fun is off the table. So let’s get real. Consumer debt is NOT FUN. You may feel like you have freedom, but it is an illusion. What you have is a growing liability that puts your financial security and family at risk. I have watched too many people fall off their own fiscal cliff and can assure you it was not fun.
I won’t pretend that it’s easy, but your hard work and temporary, austere lifestyle is worth being debt-free and truly having financial freedom.
- Calculate Your Consumer Debt: Many people don’t actually know how much money they owe. Why? Because ignorance is sometimes bliss. Don’t let yourself fall into that trap. The sooner you tackle your debt—the better.
- Look for Waste in Your Budget: Go over your budget and be ruthless. Now is the time to educate yourself on how to save money. Look for ways to reduce food waste and your grocery bill. Find free or cheap entertainment options, etc. There are so many blogs sharing great ideas on how to stretch your budget. Find and follow them.
- Earn Additional Money: To truly expedite your debt reduction, you may need to find additional money. It may be selling unwanted items on eBay or Craigslist. Or taking on a second job or side hustle. This isn’t always easy but remember it is temporary and paying off your debt as quickly possible is worth it.
Success Tip: Be very clear on why eliminating debt will benefit your life. For some, being debt-free is enough motivation. Others will need to have a clear picture of what life will be like once they have financial freedom to stay motivated. Remember, debt didn’t happen overnight and eliminating it won’t happen overnight either. Staying motivated and focused is key. Talk to your family about debt to get their support and make the journey a bit easier.
4. Become Financial Literate
The reason most people need to make New Year resolutions about money is because they are not financially literate. Most of us grew up in homes where money was a taboo topic. It’s time to break the cycle and start openly talking about money and educating yourself on how to use it in alignment with your values and goals. Money is emotional and too many of us associate fear, guilt and greed with money. I was taught money was a gift and dedicated my professional life to helping others use their money wisely on what brings them the greatest joy in their lives. And it starts by becoming financially literate. Educate yourself, your spouse or partner and your kids about money. This is an ongoing process and one of the greatest gifts you can give yourself and your family. Everyone handles money and having the confidence to make smart decisions with your money is key to long-term financial freedom.
What Are Your Financial New Year’s Resolutions?
Follow these steps and you’ll join an elite group (only 8%) who keep their New Year’s Resolutions. Even more importantly, you’ll have taken back control of your finances and can really focus on the things that matter most to you. What are your financial resolutions this year?
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