10, 9, 8, 7, 6, 5, 4, 3, 2, 1! Happy New Year! These are the words millions of people will say once the clock strikes midnight on December 31, 2020. Within a few days of celebrating the beginning of 2021, you might make a New Year’s financial resolution. Unfortunately, over 80% of people who make them will have failed by the second week of February. Don’t worry! This statistic will not apply to you unless you decide it will.
If you would like to achieve a New Year’s financial resolution, follow these tips to increase your chance of success:
Be committed; don’t just try. The word try implies that failure is an option. Once you commit to do something, you will find a way to get it done if your why is big enough.
Analyze financial lessons from 2020. This past year has been unlike any other you’ve experienced in your lifetime. Hopefully, you’ve identified opportunities to improve your financial game plan for next year. If you repeat the same behaviors, you’ll get the same results.
Adjust your behaviors. Write a list of potential outcomes if you decided to modify at least one behavior that could positively impact your financial future. Regarding your financial success, behavior plays just as big a role as intelligence, sometimes more.
Establish a savings goal for 2021. Mastering the art of saving usually prevents you from overspending. Setting a savings goal and creating a plan to hit the goal produces small wins that add up over time.
Measure the gap between income and spending. As you prepare your January 2021 spending plan, determine the difference between income and spending for December. If you repeat this process each month, you will either be satisfied or unsatisfied with your financial progress for 2021. The choice is yours.
Pay yourself in installments. Project what major expenses will incur during 2021 and start saving immediately. If you know you have a $600 bill due on April 1, it’s much easier to save $200 every month during January, February, and March. This small, but significant tip can help you better manage cash flow and reduce financial stress.
Create and follow a monthly spending plan. You have a system for just about everything in your life; money should follow a system as well. While preparing your financial plan for January, develop a budget that is simple and easy to duplicate (teach me how to budget like a pro). Capture every expense and remember to give every dollar an assignment. Don’t forget about your monthly installment payments for that future big expense. Repeat this process every month.
Retrieve a copy of your credit report. Develop a habit of checking your credit report at least once every four months. Currently, each of the three major credit reporting bureaus are offering free weekly online reports through April 2021. Please visit www.annualcreditreport.com.
Measure investment performance. If you have pre- or after-tax investments, determine what you contributed during 2020 and assess the growth or decline in your account’s value. Depending on your goals, you might need to invest more or adjust your asset allocation.
After the clock strikes midnight on December 31, you have 365 days to make your financial dreams come true. Breaking down your yearly goals into monthly milestones almost guarantees success. On your mark, get set, go!
