As we near the end of a calendar year, we often take time to pause and reflect. This tends to be the moment when we also make new resolutions for the year ahead.
For context, a resolution is a firm decision to do or not to do something. And, the making of a resolution can often be sparked by our need or want, upon reflection, to seek positive change in an area of our life.
This may be especially the case when reflecting on the 2020 calendar year.
The 2020 calendar year was a year unlike any other in recent memory—testing us financially, physically, mentally, and emotionally over an extended period.
The flow-on effect of policies implemented to combat COVID-19 (e.g. social distancing and restrictions), saw many of us experience a reduction, or loss, of our earnings (work and/or investment-related).
We may also have been more cautious with our spending, despite our earnings remaining the same. This may have been due, in part, to our concern over the state of the economy and rising unemployment—pointing to a possible reduction, or loss, in our earnings in the future.
In both instances, this may have shone a confronting light on our existing strengths, weaknesses, opportunities, threats, values and priorities—and shown us where change was required.
With this in mind, we discuss personal finance-related resolutions below.
Personal finance-related resolutions
When it comes to personal finance-related resolutions, this can encompass many different things such as earning, spending, saving, investing, donating, and paying off debt. Potential resolutions could include to:
- Earn more money: Goal: upskill or retrain in your chosen profession with X course
- Spend less money: Goal: reduce your personal and household bills by $X per week
- Stick to a budget: Goal: use a budget tracking tool to help stick to your budget of $X per week
- Save more money: Goal: save $X per week in a separate high-interest savings account or in super
- Donate more money or time: Goal: donate $X or X hours of your time this year to your chosen charity
- Pay off debt: Goal: pay off an extra $X of debt each week, or $X this year
As you can see, we have also included goals. This is in recognition that resolutions can often fall by the wayside without thinking about and planning how they can actually be achieved. More on this later.
In terms of making your own resolutions, and setting related goals, we suggest reading our articles, ‘Your 2019 financial health check’ and ‘Appropriate measures, adverse events and positive outcomes’.
These articles, when combined together, may assist with taking stock of, and reflecting upon, your existing circumstances (financial situation, goals and objectives) regarding areas of your personal finances, such as your:
- investments
- superannuation
- estate planning
- debt management
- insurance planning
- cashflow management
By doing this, you can zero in on specific areas where you need or want positive change.
However, before you get started with making your own resolutions, and setting your own goals, it’s important to understand that resolutions aren't often achieved.
For example, in the context of New Year’s resolutions, roughly 36% of us tend to ‘throw in the towel’ in the first month of making our resolutions—and, when all things are said and done, 88% of New Year’s resolutions fail.
There can be a number of reasons for this, such as the wrong mindset, poor time management, unrealistic expectations, undesirable habits, getting distracted with life, or ill-defined (or no) goals and objectives.
As such, you may find that using the SMART principle for your goal setting proves beneficial, for example:
- S for Specific – What goal do you want to achieve? And, why?
- M for Measurable – How will you track your progress towards your goal?
- A for Assignable – What do you, and others, need to do to achieve your goal?
- R for Realistic – Is your goal achievable, given your available resources?
- T for Time-based – When will you expect to achieve your goal?
Additional inclusions can be ‘E for Evaluate’ and ‘R for Re-adjust’ (SMARTER)—these can be important in terms of tracking your progress towards achieving your goal and making changes when appropriate.
Moving forward
2020 was a challenging year, testing us all in one way or another. Let’s take the insights gained and lessons learnt, and put them to good use—moving forward in a positive direction:
- “The new year stands before us, like a chapter in a book, waiting to be written.” (Melody Beattie)
- “For last year's words belong to last year's language, and next year's words await another voice.” (T.S. Eliot)
- “What the new year brings to you will depend a great deal on what you bring to the new year.” (Vernon McLellan)
Please remember, you aren’t alone—we’re here to help wherever we can.
After reading this article, you may also find the following of interest:
- Your financial health check
- Healthy financial habits for the year ahead
- Setting and achieving your most ambitious goals
- Financial needs and wants in a post-COVID-19 world
- New Year's resolutions and habit formation and change
- Strategies to overcome personal or work-related problems
- Appropriate measures, adverse events and positive outcomes
- Getting ahead financially by reducing household financial waste
Need help setting your financial goals? Call us for your complimentary financial health check.
