For many of us, each New Year’s Day is some variation of this: You wake up, full of hope and motivation for the New Year. You join a gym, buy the latest and greatest self-help books, organise your closet and call the friends you have lost touch with. Sounds somewhat familiar, give or take? Jan 2, you wake up still feeling the love and actually go to the gym, Jan 3, you sleep in a bit (actually as much as you can) and don't have time for the gym so you do the 7 minute workout on your phone instead. You see where this is going. Maybe your decline is not as steep or dramatic as mine, but we all do it.
We have the best intentions for the New Year, become a slightly super-human version of ourselves for a few weeks (or days in my case)... then slowly go back to our normal mortal selves. I am really not trying to be negative, and I think it's so important for us to take time to think about our goals for the year. Goals that you are going to dedicate yourself to becoming more financially healthy, not because of some arbitrary date, but because it will dramatically improve your life. For those who are not sure what these goals should be here’s my suggested list.
Adopt a positive attitude about money:
This is the first step for a reason. You can't be financially healthy if you don't have the right attitude towards money. The world is filled with such conflicting messages about money. On the one hand, many envy the wealthy and spend their life wanting more money. On the other hand, you often hear things like ‘money is the source of all evil’ and those who want more money are greedy. However, money is not positive or negative. Money is neutral a simple piece of purple, orange, blue or green paper. Keep in mind throughout the year and as you manage your finances; money is simply a tool that we can use to reach our life goals. Money is not everything, but it is important.
Notice I didn't say ‘Financial goals’. That's because as I mentioned above, the purpose of money is to help us reach our life goals. Take some time and list your big and little, short and long term dreams, such as: starting your own business, buying a new home, visiting Paris, renovating your bathroom and retiring at 50.
Once you have all of your goals laid out, list them by importance. Where should you allocate your money? If buying a new home is the most important, then maybe Paris can wait until another year.
Otherwise known as a net worth statement, list all your assets and debt by account and amount. If you have a partner, be sure both of you are aware of where your money is, how much you have and how much you owe. I recommend creating a simple spreadsheet that includes account, type, amount, and log in information.
Once you have your accounts organised and know how much you have and where it is, start to look at how it's invested. I recommend visiting a professional financial planner for a full investment review and recommendations, but there are pieces you can do on your own. Review your investment allocations to make sure you are appropriately diversified according to your age, goals and risk levels. Areas to review in terms of allocations and diversification are: domestic vs. foreign, industries, growth vs value, stocks, mutual funds and bonds.
Teach your children about finance:
Obviously this resolution is just for parents, but it is oh so important. As parents, we understand the importance of talking to our young children about health and proper nutrition. We get them involved in sports to teach them the value of teamwork and exercise. We are told to start talking about the dangers of drugs with our children at a very early age. Yet with all of this communication, somehow money is still considered taboo. Rarely are parents encouraged to sit down with their children to discuss the importance of budgeting or saving money. So I am encouraging you to talk about money with your child this year! And no child is too young. Even at five years old, kids can understand some basic concepts like needs vs wants, saving and sharing. If they learn the basics at a young age, they will have the foundation to continue to learn and make smart decisions as they get older. Just think how many of our adult issues could be avoided if we learned the importance of saving, avoiding debt, and how to spend responsibly at an early age. So make this the year that not only you become financially healthy, but get your children started on the right track as well. Happy New Year once again!