It’s the time of year when many of us will be making resolutions in the hope we can better ourselves in the year ahead. Usually these involve improving our health and fitness or embarking on a long-held ambition such as writing a novel. But what about making some resolutions regarding your finances?
At Serenity Financial Planning, we focus on how you view your finances as much as how you manage them because both are crucial in achieving long term financial happiness and security. When you realise just how a few simple changes can help, they will quickly become habits that you will continue to adopt for the whole year and beyond.
Here are five resolutions to help you improve your money mindset in 2017.
Remember that the journey is the destination
We’ve all heard it, but putting this mindset into practice isn’t easy when we simply don’t know how long our own journey will be. In reality, it means making sure that you use your resources to enjoy life experiences, while making sure you have enough to sustain you for the future you envisage.
Remembering the metaphor, however, also reminds us that life will change direction – as John Lennon put it: ‘life is what happens while we are busy making other plans.’ We all need to plan, but spending some of our money on enjoying life experiences in the here and now means we can enjoy the journey, wherever it happens to take us.
Be generous to your future self
Studies show consistently that children who are offered one sweet now, but three if they wait ten minutes, will usually opt for the one sweet now. Instant gratification is a natural human trait, it seems. One simple way to adjust this when we are grown up is to think of our ‘future self’ as another person, someone we need to take care of and look after. By simply distancing ourselves like this, we tap into another human instinct: to help and please others, an instinct which is more powerful than you might realise and yet helps you to achieve the balance discussed in the previous point. Consider this when you are faced with an impulse buy. Do you really need it more than your future self would enjoy having a holiday in August? Regardless of how much money you have at your disposal, there is always value to be gained to consider what else you could do with the money before you commit to a purchase.
Make all your financial goals positive ones
It’s old news in the health industry that we don’t talk about ‘losing weight’ or stopping ‘bad habits’ but instead talk about improving our fitness and eating a healthier diet. The same applies to financial goals. Make your goal, for example, to carry out a regular health check on your finances once a month rather than to reduce your debts. Don’t frame the goals in terms of reducing debt, but improving financial position. We’re much more likely to stick to positive goals than ones that make us feel negative and bad about ourselves. A clear example is the Serenity Financial Planning client who listed all his outstanding credit card bills on his office whiteboard as a reminder, little realising the negative effect of always being confronted with how much he still owed. Nowadays he writes his forecast of how much more income/profit is being generated on that board.
Pay It Forward
There should always be a feel good factor about spending money and what better way than to know what you’re paying out is going to have a real benefit for others. Buying something that benefits a charity or helps a local business thrive are great ways of doing this, even if it does mean spending a little more than shopping in the supermarket. Plus the whole idea of paying it forward is that, somewhere down the line, someone will help you in a similar way.
Remember that you can enjoy uncluttered space more than material possessions
One of the main reasons that we hold on to possessions is because we think that we would be wasting money if we throw them out. Yet clutter takes up head space that potentially restricts our ability to make clear decisions and to simply enjoy our homes as much as we could. So why not have a clear out? Sell what you can and use what you make on an experience with family or friends that you will remember long after that Adrian Mole first edition you had been convinced was worth a fortune.
Don’t make saving money a full time occupation
We all like a bargain and comparison websites are our friend but there is a danger that you could spend too much time striving to save another few pounds at the expense of, say, playing a few board games with the kids. Don’t feel hard done by when buying your home insurance but once you hit on something that looks like a good deal, stick with it and go and do something more fulfilling with loved ones instead.
Remember that money is only ever a stepping stone
You may have heard the parable about the Mexican fishermen and the investment banker before but it goes something like this…
An American investment banker is on holiday in a small Mexican seaside village when a small boat with just one fisherman docks. The investment banker is impressed by the quality of the fish but is puzzled as to why the fisherman doesn’t go out and catch more fish. When asked, the fisherman says he has all he needs to feed his family and gets time to play with his children, spend time with his friends and siesta with his wife. He doesn’t need more.
The banker then explains that if he did spend more time fishing, he could get more money, build a fleet, sell his company so he could become truly wealthy. ‘And then what?’ asks the fisherman, to which the banker replies that then the fisherman could have enough money for him and his family and still enjoy time to play with his children and be with his friends and siesta with his wife… in 15 to 20 years time.
One of the lessons this teaches us is that that wealth is only ever a stepping stone to your true goals, and that it is most important to know what your true goals actually are – you may not need to change much in order to achieve them.