Most of us begin each new year with the best of intentions. And most of us reach the end of the year without having made good on our promises to ourselves. When it comes to your money, however, there are several concrete steps you can take to help ensure that 2017 is the year when you make real progress on reaching your financial goals and achieving financial peace of mind.
Make Sure It’s What You Really Want
When it comes to money, it’s particularly easy to have good intentions of saving more and spending less. But a general wanting is not the kind of desire that’s likely to have much of an impact in your life. The first, critical thing you need is the kind of want that arises from a true emotional connection you’ve made in your life.
For example, have you become truly aware of how emotionally burdensome it is to constantly worry about money? Or have you finally envisioned a future life for yourself that is full of joy and activity that is independent of having to earn a living? Because achieving financial goals inevitably involves tradeoffs, the first thing you need to do is feel good about where it is you want to go. Without that visceral sense of what you have to gain (or lose, in the case of financial stress) your choices will seem painful rather than positive. With an emotional connection, however, the right choices become joyful – and sustainable.
Build A Base Camp Before Climbing Everest
One of the biggest impediments to achieving long-term financial success is our sense that it is beyond our reach. We see people who have achieved amazing things and we assume that it happened quickly or easily. Because we don’t know how to envision ourselves doing something similar, we get discouraged.
Like other big goals, however, financial success is most often achieved slowly, gradually, over a long period of time. (Indeed, “sudden wealth” comes with a myriad of well-documented problems of its own.) We don’t start out in graduate school. We start out in kindergarten and learn gradually, one step at a time. Metaphorically speaking, we build a base camp that we can rely on before attempting the final climb to Everest.
Your personal financial base camp will consist of both internal and external components – i.e., personal financial habits and the right financial infrastructure. Both of these things need to become second nature or even automatic (see below) because if they aren’t easy (or at least easier) over time you’ll lose interest or energy or faith and will give up. If you make them easy, however, then you’ll have the force that literally moves mountains – time – on your side.
Automate & Outsource It
Let’s say that you’ve identified your savings rate as something you want to increase this year. You have two choices: you can implement that plan either by making a specific decision each month to save a certain amount, or you can set up an automatic withdrawal and not think about it anymore. The first strategy costs a lot of time and energy and imposes the emotional burden of choice on an ongoing basis. In other words, it is costly and painful. The second choice is much cheaper (time-wise and hassle-wise) and easier. Automating decisions that are well-considered and reasonable is a clear winner.
For certain complex tasks, it makes sense to outsource the activity altogether. Yet for many of us in the relatively-educated tribe, pride keeps us from making the best decision for ourselves. I remember when I was helping my parents hire caregivers and we needed to pay them on a regular basis. “I’m smart enough to figure out how to do payroll myself,” I said to myself. “I don’t need to hire anybody to do that for us.” What a dumb decision that was. Yes, I was (eventually) able to do my parents’ payroll myself, but it cost me untold time and stress and took a lot of valuable time away from the limited amount I had to actually be with my parents during their final years. Eventually hiring a professional payroll company was one of the most cost-effective decisions I ever made.
What usually gets us in cases like this is the feeling that we’re smart enough to do things ourselves. Well, yes, we are, but that isn’t the point. The point is that there are other people out there who are also smart, who have better tools for the job, and who have a wealth of experience in doing it. And those things are valuable. We can’t all be experts in everything, and it’s simply counterproductive to avoid leveraging the abilities of others when it comes to our own financial well-being.
Find Someone You Trust to Help
Making decisions about your money can be stressful, but especially so when you’re not sure you fully understand all the ins-and-outs of a decision you’re trying to make. The financial services industry frequently compounds this problem by “selling” rather than “educating” clients. True, you don’t want to make a decision if you truly don’t understand the situation and your options. But doing nothing is also a decision, and it can be as bad a one as anything proactive that you can decide to do.
If you have gotten to the point where you feel ‘stuck’ or overwhelmed with the financial decisions you face, you don’t have to give up control of your fate. You have the option of finding someone to work with who will explain your choices, walk you through possible outcomes, and help educate you rather than selling you stuff. Knowledge is powerful. Find yourself an advisor who is willing to empower you.
Cut Yourself Some Slack
Finally, be forgiving of yourself when you occasionally fall short of your own good intentions. Achieving financial goals is much more like a marathon than a sprint. It’s a mistake to label your efforts a failure because of a short-term problem.
This concept has been illustrated to me many times when working on clients’ long-term retirement plans. Time and again, I’ve seen that a plan has successfully weathered a one-time event – be that a market slump or a spending spree – as long as things get back on track again. On the other hand, a decision to permanently decrease income or increase spending can have remarkably large long-term implications, even if those changes seem relatively insignificant in the short term. We simply tend to underestimate the impact of small actions taken consistently over long periods of time. It’s as though our brains default to the present and struggle to internalize the compounding impact of long data series. Indeed, brain science has begun to tell us that this is so.
So take heart. You can recover from almost any single bad decision you make. To do so, however, you need to get back on track and carry on.
So here’s wishing you a happy, healthy, and prosperous 2017!