As the New Year begins, losing weight, eating healthier, exercising more and spending more time with family and friends are among the most popular 2022 New Year’s resolutions. And yes, prioritizing your physical and emotional well-being is critical, especially in these turbulent times. But so is making time to ensure your financial well-being.
When people talk about improving their financial picture, they tend to focus on the here and now (e.g., how they can cut back on their current spending levels) or the past (how they can pay down their debt). Of course, creating a monthly budget is a popular goal, but let’s face it, budgeting is never a particularly fun exercise.
Instead of getting trapped in the present or the past, now is the perfect time to focus on your future financial health. I want to be clear that being financially healthy is not the same thing as depriving yourself of spending. Rather, it’s about ensuring that you are setting yourself up for more control over the big life decisions going forward. For example, consider asking yourself these types of questions:
- Is my job the right fit for me?
- How can I best use my time and money to achieve happiness?
- Am I currently in a strong position to achieve my goals?
- Do I have the right level of protection and/or flexibility if my circumstances change or my goals and priorities shift?
It can be intimidating to evaluate your existing financial health and determine how to best strengthen it for the year ahead. Here are some ideas to get you started on the right path:
Identify your financial priorities, goals and concerns
The best plans for financial health and well-being include your life goals. It’s important to give time and thought to defining your future hopes and dreams. Once you know what you want to accomplish, you can then think about how you can use your finances as the tool to help you reach them. Give some thought to what’s achievable in one year versus three years versus five years. Organizing your goals on a clear timeline can help you stay on track.
Use data to help make decisions
Information and knowledge is power. Having a strong understanding of where your money is going will help you determine whether you should stay the course or shift directions. Where are you saving? How much are you spending? When are you investing? Having this data be more accessible can help you make more informed decisions about the choices you make today.
Track your progress and create accountability
Once you establish your goals, it’s important to measure how you’re performing against those goals. For example, in my practice we have a ratings system in place that allows us to identify areas of strength and concern so that we can help our clients prioritize what’s most important in their journey to financial health. Having something like this in place can help you solidify your plan and determine the action steps needed to help you reach your specific goals. Don’t forget about accountability. Whether it’s your partner, family member, or financial professional, make sure you have someone committed to your plan and who will raise the red flag if you’re veering off course.
Celebrate the improvements
As you make progress against your plan, don’t be afraid to celebrate the small victories. Sometimes it takes people a long time to find success. Along the way, if you are happy with your overall progress you can build in rewards for yourself to enjoy. Again, financial health isn’t about deprivation; it’s about striking that all-important balance between financial security and freedom.
Consult with a financial professional
Working with a personal finance expert can be extremely helpful, especially when it comes to looking at the whole picture of your financial health. Chemistry is an important consideration as you want to work with someone whose financial philosophy aligns with your own. Don’t just look for someone with a single defined area of expertise like investments or insurance. The best professionals are able to look at your personal finances holistically so that you’re able to make the most informed decisions based on your individual circumstances and lifestyle. Professionals also bring education and coaching to help you feel empowered as opposed to intimidated.
The start of 2022 brings an opportunity to hit the reset button and make improvements to how we live our lives. Committing to becoming financially healthy this year is the first step toward creating a better, healthier life for you and the people you love.