In my line of work, it’s frustrating to know that so many people feel stress and anxiety connected to their finances, and yet our society continues to place little emphasis on financial education. (It’s one of the reasons I wrote a personal finance book and maintain a podcast on important money topics!) The consequence is that so many people – and especially women – are forced to face financial challenges that they’re ill-prepared for and struggle to maintain good financial health even as they approach or enter retirement.
Having poor financial health isn’t just about struggling with your finances, however. Your relationship with money impacts so many other aspects of your life, including productivity, physical health, and mental health. It may seem overwhelming to achieve financial success – or even find financial stability – but it doesn’t have to be. The strategies listed below, when followed diligently, can help anyone improve their financial fitness. Are you ready to find financial success this year? Read on for 10 financial resolutions that can help you get started.
#1. Live within your means.
When it comes to wealth management, creating and following a budget is a crucial first step. It becomes the foundation from which you can begin to build your financial plans. Let’s be honest; it can be incredibly easy to overspend without even realizing that you’re doing it. So, sitting down and tracking where your money is going allows you to fully understand what your financial reality is. Take some time to observe your money habits, then sit down and create a budget that’s doable and works with how much money you’re making. Work hard to follow it for three months, then reassess as needed.
If you’re unsure about where to start, budgeting apps like Mint or Personal Capital can be great tools. You could also create a simple Excel document. The point is to keep your information organized and all in one place so you can track your spending more easily.
#2. Save as much as possible.
The only way to build your savings, a retirement fund, or an emergency fund is to begin saving and commit to continue saving as much as you can. Every little bit makes a difference, so pay attention to your budget and set aside any excess cash you may have each month. If your place of employment offers a company-sponsored retirement plan, begin putting some of your paycheck into a retirement savings account. If your employer doesn’t offer one, think about opening an IRA where you can start saving for retirement.
Make sure that you work your savings into your budget so that it’s accounted for when you’re looking at your larger financial picture. It costs a lot of money to support yourself in retirement, and the more that you save throughout your working life, the less of a financial burden you’ll find yourself having to carry once you enter retirement.
#3. Diversify your investments.
When it comes to investing, the smartest thing you can do with your money is to diversify your investments. Choosing one or two stocks to put all of your money in opens you up to substantial risk should those companies not do as well as you hope. A strong portfolio takes into account your risk tolerance, cash flow needs, time horizon, long-term financial goals, and provides an investment strategy that fits your unique situation.
Investing can feel incredibly complicated, so don’t hesitate to seek out a fiduciary investment advisor who can help guide you.
#4. Don’t underestimate the power of compound interest.
Compound interest is a little bit like financial magic. It allows you to make money on your own money, and you don’t have to do anything but let it sit there and continue to grow. When you take full advantage of compounding, your savings and investments can grow significantly. And the earlier you start, the more you can benefit.
#5. Educate yourself on topics you’re unsure of – like investing.
In all things, education is power. This is especially true when it comes to your finances, where so many aspects can be complicated and difficult to understand. The more educated you are on topics like investing or various types of retirement savings accounts, the more empowered you’ll be to make the best decisions for your financial future.
Luckily, there are many readily available resources to help you learn more about money topics. Websites, books, podcasts, blogs, and online courses all exist to help you understand how to invest smartly and manage your money. So, find resources you trust and make it a habit to learn from them.
#6. Teach your children to be financially literate.
Want to give your kids the gift that keeps on giving? Help them build their financial know-how from an early age. Our education system fails to teach financial literacy to our children, so it’s on us as parents to be sure that our kids grow up understanding the basics of personal finance and wealth management topics.
Communication is key when it comes to teaching your kids about money. Include your children in discussions about budgeting, saving for big expenses, or charitable giving as a way to get started.
#7. Don’t forget about estate planning.
Nobody likes to think about their mortality, but none of us will live forever and we don’t know how much time we’ll have. If COVID-19 has taught us anything, it’s that we can never be too prepared when it comes to our finances or too sure that tomorrow is ours. That’s why it’s so important to have a will in place and your estate in order so that those you leave behind will understand your wishes. This is especially important if you have children or dependents who are dependent on you.
Regardless of how old you are or how healthy you are, talk to your family about how you want to distribute your assets upon your death and make sure you put those wishes into a legal document.
#8. Keep your emotions out of big money decisions.
The relationship between money and emotions is a deep and complex one. It takes intention and skill to keep your emotions at bay when it comes to big money moments – especially when we’re talking about something as volatile as the stock market. Try your best to give yourself time to calm down and make your decisions from a place of rationality and logic rather than impulsivity and panic. You’ll thank yourself later.
#9. Share your success.
If you’re financially stable enough to have excess funds, consider giving to causes that you’re passionate about. Cultivating a sense of philanthropy in yourself, your business, and your family not only helps those in need, but it can benefit you in meaningful ways, too.
#10. Find a team you can trust and lean on them.
Finances are complicated and there is no shame in asking for help about how to best manage your money. Finding a financial advisor or investment advisor that you can trust and who can guide you as you build a retirement plan, an estate plan, and an investment strategy can make all the difference when it comes to finding financial success. A professional can help you ensure that you’re taking everything into consideration, looking at the big picture, and doing what you need to in order to accomplish your long-term financial and life goals.
Healthy Finances, Healthy Life
You’re working hard for your paycheck, and you deserve a life that’s unburdened by financial stress. In this New Year, give yourself the gift of financial fitness. Doing the work now to get your finances in order is a way to gift your present and future self a stress-free life once you enter retirement.