It is the last couple of hours of 2012 and I know a lot of folks are whipping out their notebooks and pens or digital gadgets to make brand new resolutions for 2013. If you are one of those people, I say “please hold on” and do one thing first – take stock! Yeah, take stock of 2012, especially your financial life during the past 365 days before making new resolutions. After all, there is plenty of truth in the saying that, “you can’t know where you are going until you know where you have been.”
So how do you take stock and what does taking stock have to do with living your best financial life? Well, let’s find out, shall we?
- Did you make a resolution on January 1, 2012? If yes, how about you bring out the paper or the section of your gadget where you documented it and have a little “accountability moment?”
- Did you meet all your goals? If yes, hold off on the jubilation until you answer the next question.
- If you met all your goals, search your soul and see if you actually set the bar high enough. If you did and met the goals, then you should celebrate and aim even higher in 2013.
- If you didn’t meet your goals, don’t beat yourself up. Think about, and document the reasons why you didn’t meet them, and think about possible solutions to the problems. For instance, was your goal to save more or live on less than your income? If you failed to meet that and ended the year in debt. One of the areas to think about, which may not be obvious to you is the sort of company that you keep. If you have a habit of hanging out with friends whose sole agenda every Friday night is “clubbing” and “lounging”, you may want to evaluate how much that cost you in 2012 and see whether you can afford to spend that much creating memories you are often too drunk to remember the next day. 2013 may be the time to change your circle of friends.
- Did you end 2012 richer or poorer? The true of measure of this question is not how much you have in your bank account, it is really through something I now like to call the “DOES” plan. I talked about this in one of my first articles on the blog, which you can find here: https://ourfinancialcoach.com/2011/10/21/living-my-best-financial-life-where-do-i-start-from/. So evaluate and compare what you own to what you owe currently, and remember that those designer shoes and bags don’t count when calculating what you own, but the balance on your credit card, which you used to pay for these items count when calculating what you owe (yeah! you may be left with the debt with no “property” to show for it).
- How much did you make in 2012? A lot of people won’t know how much they earned during the year until their W-2 arrives and opening it leaves them in shock. Check your pay stubs and get an idea of how much you really made.
- Now, how much did you save? I hope you saved something!
- How much of the savings in question 7 is left in your bank account? If its zero, please don’t beat yourself up till you answer the next question.
- Did you make any big purchase during the year with your savings? Perhaps a house, car or even start a business? If yes, its okay to have a zero balance in your savings today. If no, you need to think about where the money you saved went to. If you can’t remember, then there is a problem (sad face!)
- How much did you spend and what did you spend it on? How much did you pay for the cable TV you hardly watched? For the movie package you were too busy to benefit from? The home land line no one except telemarketers call you on? You may actually be surprised at the annual cost of these categories that may seem quite small when you pay for them each month.
This exercise may be painful for some people, but like George Santayana said “Those who are unaware of history are destined to repeat it,” if you don’t take stock to see what you did well and the mistakes you can learn from, you may just repeat the same ones.
So now that we have closed the chapter on 2012, how about we look at some tips that will make you finish 2013 richer than you are about to start it:
- Understand your relationship with money, know what your strong and weak points are so that you can maximize your strengths and work on the areas that need improvement. My money color quiz can help you do this. Take the test here – https://ourfinancialcoach.com/2012/05/15/what-is-your-money-color-3/
- Establish simple, clear and measurable financial goals. Don’t be afraid of aiming high.
- Take the credit cards out of your wallet. Yes, if its there, you will swipe it without thinking. The lines between your needs and flimsy wants will become blurry. So save yourself from yourself and keep the credit cards at home.
- Establish a budget. It is your road map to success and it is not just for the miserly or the stingy folks. A budget helps you “smell trouble” before it lands. For instance, I just did my January 2013 budget and realized that I have to defer some expenses to later months because I won’t make enough money in January to cover everything I wanted to buy.
- Delay self gratification. Yes, you deserve the brand new Rolls Royce but how about you wait till you actually make the millions before buying it, huh?
- If you must charge an item you absolutely need to have on your credit card, make sure you make room in your budget for the next month to pay it all off. One of your new year resolutions is to stop your credit card company from feeding fat on your hard earned money.
- Make up your mind to save. Yes, save something no matter how little. If you don’t save now that you are earning “peanuts”, you probably never will. See my article on savings here – https://ourfinancialcoach.com/2012/07/24/5-reasons-your-savings-account-has-a-zero-balance/
- Post your goals on the wall by your bedside to remind yourself about them. This will help bring you back to the “center” when you are about to stray.
- Establish an “accountability circle.” Staying disciplined financially is tough, even for the most conservative spender, but like weight loss, quitting cigarette and many other journeys we embark on, we seem to do better when we have a small circle of people to keep us accountable.
- Watch out for my new book coming out in February 2013 by the grace of God. This is one book you have to read, whether you have a business, plan to start one or just trying to manage the business of “you.”
I wish you all the best in 2013 and beyond!
Happy New Year!