Welcome to 2023, Friends!
Hopefully by now you have all fully recovered from the busyness around the holiday season, and some of you may even still be holding true to your New Year’s Resolutions.
New Year’s Resolutions are funny things. Many people around the world set the best of intentions to begin a new calendar year doing something they feel should be positive: usually some kind of self-improvement or service to others.
And yet somewhere along the way – usually by around the middle or end of January – those best of intentions have fallen along the wayside. Resolutions to improve health, finances, and behaviors all become victims of the difficulty so many people have with keeping up with commitments. It’s not that they don’t want to do it, it’s just that it is hard to create new patterns or routines and to maintain them consistently.
Sometimes the best solution is just to remove the human factor from the situation, at least as much as possible. For example, wanting to increase savings is often cited as one of the top most popular New Year’s Resolutions but many people still struggle to achieve it.1
The problem isn’t that it is a bad goal but rather that too often people go about it the wrong way. They spend first, and then save what is left over at the end. And maybe they are able to limit and control some of their savings for a few weeks or even a couple of months, but eventually all of the daily buying decisions and unplanned expenses catch up with them and that savings plan goes out the window.
One way to help reach our financial goals is to flip the script. Instead of spending first, try saving first. Create a budget that includes all of your necessary expenses and then take out the dedicated amount that you want to save and put it aside at the beginning of the month. Those funds can go into a separate savings or wealth building account, or can be allocated across all of your savings buckets if you have a more developed strategy. And then you live off of the rest of the funds that you already budgeted for.
It is this exact same savings-first tactic that makes automatic payroll deductions like 401ks such successful wealth-building tools. The savings happens automatically, without having to think about it or take any action, and before long we get used to it and used to planning the rest of our lives with what is left over. Meanwhile all the savings continues to grow (and compound!) in the background, over time.
All of this works best if you already have an established emergency fund to fall back on when unexpected costs pop up, as they always do. And in fact, using this strategy to create and build your emergency fund should be your #1 priority if you don’t already have one. Because without an emergency fund people often resort to the worst options to cover their costs, including relying on high-interest credit cards and other debt instruments that drag down your cash flow and your balance sheet.
Having a comprehensive and cohesive financial plan with actionable goals and a roadmap to achieve them can be a vital part of all of this. It can get you clear on how much you can save, what purposes you want to save for, and where you should allocate all of your savings to be most effective and efficient.
If you don’t yet have a financial plan, or even a defined savings strategy, then reach out to me and let’s talk. I can show you how easy it can be to set some helpful structure around all of those good intentions and put yourself on the best path forward.
And no matter what, let’s all resolve to make 2023 the best possible year we can.
The Time To Plan Is Now!
1Source: https://www.fool.com/the-ascent/research/financial-new-years-resolutions/