We’re a couple of weeks into the new year now. We’ve already talked about good financial resolutions for 2019. Now, let’s get down to the nitty gritty and talk about how to actually put those things into practice and kick your finances into high gear.
#1 - Take your financial vital signs
Check your credit score, add up your account balances (checking, saving, and investments), debt balances (student loans, credit cards, and any mortgage or personal loans), then calculate your net worth. This is your starting point for this year.
Depending on how 2018 went, doing this may be a little intimidating... It’s kind of like stepping on the scale for the first time after the holidays - none of us want to do it, but we’ve got to face the facts. You need to know where you’re starting in order to create a game plan for where you want to go.
#2 - Do an honest analysis of your 2018
Did you achieve the goals you set out for yourself? Why or why not? Were there any bad habits that wreaked havoc on your credit or net worth?
Too much shopping? Excessive brunching? Not enough investing? Forgetting to automate savings and contributions to your retirement account?
Whatever it was that seemed to get in your way, write it down. Although tough to admit, it’s always better to face the demons now than let them interfere with another year of potential progress!
#3 - Define your big financial goals
Now that you know where you’re starting, it’s time to clearly articulate where you want to go in 1 year, in 5 years, and in 10, 20, and 30 years from now.
What do you want your financial future to look like? Do you want to have an emergency fund that could cover six months’ worth of expenses? Do you want to own a home? Pay off all of your student loans or credit card debt? By when? Do you want to pay for your kids to go to college? What about take time off from traditional work to start a non-profit or serve a purpose you feel called to serve?
You have to get clear on your goals and what you’re working toward first.
#4 - Create a plan
Once you’ve defined your financial and life goals, take time to figure out what steps you need to take to reach each of those finish lines.
If your goal is to have a full emergency fund in a year, how much do you need to set aside every month to accomplish that? If you want to buy a house in five years, how much should you save or invest every week, month, or year to afford the downpayment? If a secure retirement is one of your goals, how much do you need to contribute to your retirement account and how should you invest those funds to get there?
If you aren’t sure how to create a plan to achieve your goals, consider enrolling in one of my courses - MONEY or WEALTH. These courses walk you step-by-step through important money concepts and show you how to turn your dreams into a realistic, actionable plan forward.
Click the picture below to check them out!
#5 - Take action
Once you know how much you need to save and invest, and how to allocate that money, put that information into action! Create a budget that prioritizes those goals. Allocate the first dollars of your paychecks toward those ends. Cut out frivolous expenses and other shit you spend money on that isn’t in line with your priorities and values. Set up direct deposits from your paycheck into your emergency fund, savings account, college fund, and retirement account in the proper amounts.
A plan is just a piece of paper without action and implementation attached.
#6 - Play the financial field
As you’re taking action and bringing those financial dreams to life, ask yourself if there are better accounts or products that you could be using that would help you reach those goals even faster.
For example, are you earning as much interest on your checking and savings accounts and emergency funds as you could be? Are you being charged fees for things at one institution that another bank wouldn’t ding you for? Are you earning as high a return on your investments as possible for the strategy you’re following? Or is your 401(k) a leaky bucket that’s losing money left and right to excessive or hidden fees?
Remember that YOU are in the power position when it comes to the accounts you use. If there’s something more suitable out there for you, you should probably consider switching.
#7 - Increase retirement / investing contributions
One of the easiest ways to get more comfortable with investing and better your financial future is to increase the amount you’re saving and investing for the long term.
This year, bump up the percentage of your income that you’re contributing to retirement. If you’re already contributing enough to reach your retirement goals, then open a separate, taxable personal account or an IRA and contribute money to that as well. Or download an investing app like Acorns that rounds up your purchases and invests that money on your behalf.
#8 - Fund your goals on autopilot
Automation is one of the best tools to overcome competing wants, the desire for instant gratification, and analysis paralysis in the moment.
Once you know what your goals are, how much you need to save and invest every week, month, or year to reach them, and which accounts will serve as the best vehicles to put that money to work, schedule your payments or contributions so that they happen automatically. The beauty of this system is that it only requires you to do the bulk of the work once, then monitor and tweak every now and then as necessary. Once you set up the automatic transfers, you get to kick back and live your life knowing that you’re funding your future financial dreams and goals.
Which money moves are you committed to making this year?
Leave a comment below to let me know!