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10 Financial Moves You Need To Make This Year

10 Financial Moves You Need To Make This Year

Whatever past mistakes you’ve made, 2014 is the year to change your habits. I’ve noticed I’m an impulse spender who always looks forward to that next big purchase. No matter how much money I make, it never feels like enough, as I’m always filling previous voids. In order to break that habit, I sought the advice of several financial analysts and life coaches. Each helped me identify trends in my personal life that affect my finances. To combat it, we’ve come up with a list of financial moves I need to make this year, and you should too.

Assess Yourself

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    Smurfette wept at she stared at the pile of bills she earned at the strip club…

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    Take an objective look at your finances. Are you making enough to cover your spending while paying your past financial obligations and preparing for the future? If you’re spending based on future income, there’s an issue. You need to look at the numbers involved in your personal finance at least once a month to ensure you’re staying abreast of your current financial situation.

    T.J. Tillman, a founding partner at Empire Wealth Management says, “My recommendation is to have a hierarchical set of financial priorities and not stray from it.  The order would be (from bottom to top) paying for basic monthly expenses like food, shelter, etc., money set aside for emergency savings, money set aside for retirement, and then discretionary income to save up for major purchases. By following these guidelines, it’s possible to live a life with significantly less stress and still work towards those material things that are nice but not necessary.”

    Pay off Your Credit Cards

    Your highest interest rates are coming from your credit cards–and that’s just the start of where they get bad. Having revolving credit is only good for your credit if you have an abundance of available credit (money you could spend, but haven’t). Even this is only true of true credit cards; pre-paid credit cards don’t even report to your credit agency (you’re paying a fee to use your own money).

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    Paying off credit cards is a vital step in treading above financial waters. Pay off cards with the highest interest rates first, and know that if you took out any cash advances, that balance is paid off last (earning the banks the highest interest rate for as long as possible).

    Strengthen Your Reserves

    Every penny you save counts. Stop looking at bonuses as “free money.” In fact, stop looking at any money as free; you have to work for every cent. Stop discrediting the effort you put into your own personal blood, sweat, and tears, and instead start paying the most important bill of your life: your monthly payment to your personal savings account. You want to have at the ability to pay at least 3-6 months worth of bills in case an emergency comes up. You’re never 100% in control of your own income, and even if you were, life happens. Be prepared for an empty tanks with a reserve can just in case.

    Settle Your Debts

    It’s never fun owing anyone; I’ve never heard someone say, “I’m so happy I owe money to (insert anyone’s name).” Settling debts will strengthen your reputation and lift a mental burden from your shoulders. Instead of thinking about who you owe what to, you can concentrate on what’s important in life. “Karma is real, baby,” explains Life Coach Melanie Cobb. “Money can’t flow to you if your incoming channel is clogged with old resentments, guilt, or small stories.” Drop the guilt and clear those burdens off your plate.

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    Tired Until You’re Retired

    Unless you’re Benjamin Button, one day you’re going to get old. If you don’t start saving now, you’ll be one of those old people who’s still working. It’s easy to think you’ll never be that way, but it’s as inevitable as death if you don’t do something to prepare now. What if the world ended today? What if aliens invaded and are going to destroy the earth. You’re not on the president’s call list–he doesn’t even know you exist. So what will you do? If you don’t have a plan, you’re not a survivor of the zombie apocalypse; you’re a zombie.

    Habits Are Made to Be Broken

    Bad spending habits are the root of most people’s financial problems. Stores know this, and that’s why there are impulse items strategically placed throughout the store. In fact, nearly everyone is counting on you to spend money, and the only person you can count on to be responsible with your personal finances is yourself. Break free of bad spending habits by practicing discipline and focusing on your financial goals, rather than relieving your temporary cravings. Also a word of advice–eat before you go grocery shopping to keep from overspending.

    Review Your Permanent Record

    You need to check your credit report today; in fact it’s a good idea to check it at least once a month. Remember how you had a permanent record in school? Teachers would always threaten to list misdeeds on your permanent record. You couldn’t see your permanent record then, but you can check your credit report to ensure you truly are responsible for the financial decisions you’re being credited for. Now you know, and knowing is half the battle.

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    Be Open About Your Finances

    If you keep your finances a dirty secret, it’ll eventually come out the closet to bite you in the ass. You need to be honest with people–you don’t have to tell them how much money you make or have, but you don’t need to be ashamed to tell people you’re not willing to pay to go out because you’re currently saving. They may ask questions, but you can politely remind them that you’d rather not discuss finances whenever it gets too personal. You don’t need to broadcast your checking account balance; just don’t act like you have ends you don’t.

    Seek Professional Help

    There’s no shame in asking for help. Even Michael Jordan needed coaching. People like T.J. Tillman and Melanie Cobb represent an entire industry dedicated to coaching and motivating people through the tough financial times. It’s not necessary to take on the burden of all your debt and finances yourself. Cash rules everything around me, so it’s a pretty big deal that’s worth spending time discussing with a qualified professional.

    Be Realistic

    We all want to be billionaires and spend money on all the things Bruno Mars sings about, but we’re not all CEOs, so we’re not likely to have that chance. Be honest with yourself; you can lie to everyone else, but always be honest with yourself about where you actually are. You can’t find your destination if you don’t even know where you’re at. Realistically assess your resources and options, and stick to goals you can actually stick to; it may take a little suffering, but, with resourcefulness and perseverance, you can make the right financial moves this year to bring success to any endeavor.

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    Last Updated on August 20, 2019

    How to Set Financial Goals and Actually Meet Them

    How to Set Financial Goals and Actually Meet Them

    Finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. And that’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

    In this article, we will explore ways on how to set financial goals and then actually meet them with ease.

    5 Steps to Set Financial Goals

    Though setting financial goals might seem to be a daunting task but if one has the will and clarity of thought, it is rather easy. Try using these steps:

    1. Be Clear About the Objectives

    Any goal (let alone financial) without a clear objective is nothing more than a pipe dream. And this couldn’t be more true for financial matters.

    It is often said that savings is nothing but deferred consumption. Therefore if you are saving today, then you should be crystal clear about what it is for. It could be anything like kid’s education, retirement, marriage, that dream vacation, fancy car etc.

    Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives, however small they may be, that you foresee in the future and put a value to it.

    2. Keep Them Realistic

    It’s good to be an optimistic person but being a pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going out of the line will definitely hurt your chances of achieving them.

    It’s important that you keep your goals realistic in nature for it will help you stay the course and keep you motivated throughout the journey.

    3. Account for Inflation

    Ronald Reagan once said – “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman”. And this quote sums up the best what inflation could do your financial goals.

    Therefore account for inflation whenever you are putting a monetary value to a financial objective that is far away in the future.

    For example, if one of your financial goal is your son’s college education, which is 15 years hence, then inflation would increase the monetary burden by more than 50% if inflation is mere 3%. So always account for inflation.

    4. Short Term vs Long Term

    Just like every calorie is not the same, the approach towards achieving every financial goal will not be the same. It is important to bifurcate goals in short term and long term.

    As a rule of thumb, any financial goal, which is due in next 3 years should be termed as short term goal. Any longer duration goals are to be classified as long term goals. This bifurcation of goals into short term vs long term will help in choosing the right investment instrument to achieve them.

    More on this later when we talk about how to achieve financial goals.

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    5. To Each to His Own

    The journey of setting financial goals is an individualistic affair i.e. your goals are your own goals and are determined by your want to achieve them. A lot of times we get on the bandwagon of goal setting only to realize later on that it was not meant for us.

    It is important that your goals are actually your goals and not inspired by someone else. Take a hard look at this step at all the goals you’ve set for after this step, you will be on the way to achieve them.

    By now, you would be ready with your financial goals, now it’s time to go all out and achieve them.

    11 Ways to Achieve Your Financial Goals

    Whenever we talk about chasing any financial goal, it is usually a 2 step process –

    • Ensuring healthy savings
    • Making smart investments

    You will need to save enough; and invest those savings wisely so that they grow over a period of time to help you achieve goals. So let’s get down to ensuring healthy savings.

    Ensuring Healthy Savings

    Self realization is the best form of realisation and unless you decide what your current financial position is, you aren’t heading anywhere.

    This is the focal point from where you start your journey of achieving financial goals.

    1. Track Expenses

    The first and the foremost thing to be done is to track your monthly expenses. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you would be surprised to see how small expenses add up to a sizeable amount.

    Also categorize those expenses into different bucket so that you know which bucket is eating the most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pump up your savings rate.

    2. Pay Yourself First

    Generally, savings come after all the expenses have been taken care of. This is a classical mistake which almost everyone of us do. We pay ourselves last!

    Ideally, this should be planned upside down. We should be paying ourselves first and then to the world i.e. we should be taking out the planned saving amount first and then manage all the expenses from the rest.

    The best way to actually implement is to put the savings on automatic mode i.e. money flowing automatically into different financial instruments (for example – mutual funds, retirement corpus etc) every month.

    Taking the automatic route will make us lose control of our money and hence will compel us to manage in what’s left with us thereby increasing the savings rate.

    3. Make a Plan and Vow to Stick with It

    Budgeting is the best to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be made.

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    Nowadays, several money management apps and wallets can help you do this automatically. It’s easy and who knows, you may just end up doing what people fail to do.

    At first, you may not be able to stick to your plans completely but don’t let that become a reason why you stop budgeting entirely.

    Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

    You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

    4. Rise Again Even If You Fall

    Let’s be realistic. It’s not like the world will come to an end if you made one mistake. This isn’t called leniency but discipline.

    If you fail to meet your budget for a month, don’t give up the entire effort just like that. Instead, start again.

    Remember that flexible plans are the most realistic plans. So go forward and try to follow your financial goals as planned but if for some reason, the plan gets out of hand for you, do not give up on it just yet. This has a lot to do with your psychology rather than any material commitment.

    All you have to do is to stay on the road and vow to stay on it, no matter how much you fall down.

    5. Make Savings a Habit and Not a Goal

    In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

    Make Savings a habit rather than a goal. While it might seem to be counter intuitive to many but there are some deft ways of doing it. For example:

    Always eat out (if at all) during weekdays rather than weekends. Usually weekends are expensive. Make it a habit and you would in turn be saving a great deal.

    If you are travelling buff, try to travel during off season. Your outlay will be much less.

    If you go out for shopping, always look out for coupons and see where can you get the best deal.

    So the key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice which will be harder to sustain over a period of time.

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    6. Talk About It

    Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission. And it would be rather easy to lose the grip over your discipline.

    Therefore in order to stay the course, it is advisable that you keep yourself surrounded with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

    7. Maintain a Journal

    For some people, writing helps a great deal in making sure that they achieve what they plan.

    So if you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

    Use this journal to write down all essential points such as your short term, mid term and long term goals, your current sources of income, your regular expenses which you are aware of and any committed expenses which are of recurring nature.

    When you have a written commitment on paper, you are going to feel more energised to follow the plan and stick to it. Moreover, it is going to be a lot more easier for you to follow you and track your progress.

    At this point, you should be ready with your financial goals and would be doing brilliantly with savings; now it’s time to talk about the big daddy – Investments.

    Making Smart Investments

    Savings by themselves don’t take anyone too far. However savings when invested wisely can do wonders and we are at that stage where we will talk about making smart investments.

    8. Consult a Financial Advisor

    Investments doesn’t come naturally to most of us therefore rather than dabbling with it ourselves, it is wise to consult a financial advisor.

    Talk to him/her about your financial goals and savings and then seek advice for the best investment instruments to achieve your goals.

    9. Choose Your Investment Instrument Wisely

    Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about them.

    Just like “no one is born a criminal”, no investment instrument is bad or good. It is the application of that instrument that makes all the difference.

    Do you remember we talked about bifurcating financial goals in short term and long term?

    It is here where that classification will help.

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    So as a general rule, for all your short term financial goals, choose an investment instrument that has debt nature for example fixed deposits, debt mutual funds etc. The reason for going for debt instruments is that chances of capital loss is less as compared to equity instruments.

    10. Compounding Is the Eighth Wonder

    Einstein once remarked about compounding,

    Compound Interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.

    So make friends with this wonder kid. And sooner you become friends with it, quicker you will reach closer to your financial goals.

    Start investing early so that time is on your side to help you bear the fruits of compounding.

    11. Measure, Measure, Measure

    All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments; taking stock of how our investments are doing.

    If there is one single step where everything (so far) can go wrong, it is at this step – Measuring the Progress.

    If we don’t measure the progress timely, then we would be shooting in the dark. We wouldn’t know if our saving rate is appropriate or not; whether financial advisor is doing a decent job; whether we are moving closer to our target or not.

    Do measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

    The Bottom Line

    This completes the list of tips for you to set financial goals and actually achieve them with not so great difficulty.

    As you can see, all it requires is discipline. But guess that’s the most difficult part!

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