As you look ahead to 2021, what is realistic – dare I say DO-ABLE – when it comes to making New Year’s financial resolutions?
The answer - only the ones you can keep! All the rest simply result in dreamy discouragement.
Most of the financial resolutions I’ve ever seen can be summed up as the desire for financial freedom. Financial freedom is the configuration of your financial life in such a way that you can be who you want to be and do what you want to do.
If you are not presently financially free, you can either: (a) change your input (i.e., the configuration of your financial life), or (b) change your output (i.e., the “be who you want to be” and “do what you want to do” part).
Most people realize that true freedom comes from realistically adjusting both.
You simply cannot be and do everything that comes into your imagination. So, you’ve got to choose. To prioritize. But don’t lower your goals too much – you’ll squash your motivation. Be willing to dream big.
But in order to get to those big dreams, you’ve got to take care of the second part of the “financial freedom” equation – you’ve got to change your input…you’ve got to change the configuration of your financial life.
And here’s how you do that…
1. If you want to be financially free, become financially disciplined. Most of us start with a few basic pieces of this financial chess game we play. We’ve got income, assets and (potentially) time. Given that all of those are limited, we’ve got to get our assets and our regular savings working for us over time. The single most decisive factor I have seen separating the financially free from the financially enslaved is discipline – the discipline to save, stay out of debt, protect oneself against the unknown and regularly reassess one’s situation and adjust accordingly.
2. If you want to be financially disciplined, install financial structure. Does all that discipline sound hard to pull off? It is. So, don’t try to do it solo.
If you attend a structured exercise class. All you need to do is show up, and the instructor does the rest. He (or she) leads you in some stretching and mobility, followed by some strength work and may wrap it up with a gut wrenching “metabolic conditioning” session (think panting, sweating and gasping) that rounds out the hour.
You would never do this work out on your own. It’s just too hard. A structure that “forces” you to do what you really want to do, but would not do on your own.
Most of us need these same kinds of structures for our money.
3. If you want financial structure, hire a personal financial coach. A great coach makes you to do what you don’t want to do, so you’ll get what you really want. In athletics, this involves the discipline and structure of practice and work outs to get a win.
In personal finances, this means designing and implementing a plan that is built around the structures of spending, savings, protection, investments, taxes, debt, retirement and estate preservation…so that you can get to your ultimate goal of financial freedom.
For many folks, it can be as short and sweet as this:
Resolved: in 2021, I will hire a financial coach.