03 Jan New Year’s resolutions
Well its that time of year again! Some of us have no doubt tried to set New Year’s resolutions, whether lifestyle-, diet-, fitness- or finance-related, but life has likely got the better of most of us already.
Of all of the above, financial resolutions can be the hardest to keep due to unplanned expenditure or possibly the winter doldrums; booking that summer holiday or just feeling like spending on yourself in the ‘depressing’ winter months. There is even a special day allocated in January – Blue Monday.
For many the challenge is to try to set specific financial resolutions or objectives such as to spend less, save more into a pension or buy that bigger house (with a bigger mortgage) but in my experience most people have not considered or set any specific long term goals that they actually want to achieve with their life. This is not an easy exercise for most people, because it is not easy to see past where we are now and visualise the future.
A good starting point is to consider your money values, rather than becoming fixed on the specifics, and spending time trying to formulate individual long term financial goals. This is not necessarily an easy task but spending time thinking about this and discussing your thoughts with your partner can be very valuable. What I mean by ‘money values’ is not a specific goal but your overall thoughts about money. A good starting point is to ask yourself the following:
- Why do I go to work every day? Think beyond your salary.
- Do I want to help future generations of my family?
- How do I feel about money? Do I worry about running out of it?
- How do I feel about having a large debt?
- Is money a means to an end or do I just try to accumulate financial assets?
- What do I want to have achieved before I stop having to work?
- In an ideal world when would I like to be able not to work and what would I like to do?
- What would I like to do if I could take some time off paid work?
You may find that you and your partner have similar thoughts or did not realise something about each other which explains why you both feel differently about certain financial decisions.
Having articulated your money values this will enable you and your partner to decide on some statements that describe your views on money and your overall attitudes. We like to call these your ‘high level policy statements’ (HLPS).
HLPS can then be used to help you to decide on your specific financial goals that have a timeframe and an estimated financial cost. E.g. buy a larger house in five years for c.£1m in today’s terms. ‘Take more holidays when I can afford to’ is not a specific goal as it lacks any cost or timescale component. They also provide you with a check and balance for when you are making financial decisions and are not sure what to do. In the future you can go back and look at your HLPS and they may guide you in your decision making.
A financial plan should always start with your values which will lead to your financial goals and it is on these that the plan needs to be based. In our experience this approach is more productive than trying to stick to one-off financial resolutions or starting a savings plan or pension because you think you need to but have not taken any time to consider what outcome you are trying to achieve.
There are a wealth of great books available that suggest ways to do this and highlight the benefits but a discussion with an experienced financial planner is always a good place to start. In the meantime you can get back to the gym, drink a glass of warm water with a slice of lemon and rejoice that dry January is upon us!