You didn’t really need a new year to have a fresh start but you’ve got it, so you might as well take advantage of it. The beginning of a new year is the time when many people vow to be better than the previous year and to start being more intentional about reaching their goals. Maybe you spent more than you planned on over the holidays. Maybe you didn’t quite reach your financial goals in 2018. Maybe you reached all your 2018 financial goals and you’re hungry to push a little further this year. Since the new year is time when people focus on setting goals and making changes, we can do the same in regard to our financial goals.
Take Time To Reflect
First, take some time to reflect on 2018 including what went right, what went wrong, and what needs to be changed to make sure that you reach your 2019 goals. If you didn’t keep track of your personal finances in 2018, then this could end up being a time-consuming process. Don’t let that dissuade you from taking the time to complete it. Knowing what you did with your money last year, even at a high level, will help you make decisions about what you want to make sure that your money does for you in 2019.
Complete A Review Of Your Spending
As I mentioned above, if you didn’t track your spending in 2018, then you don’t need to go back and categorize every single thing that you spent money on. You can simply scan through your bank and/or credit card statements and make mental notes of where it seems like most of your spending went and where big purchases happened.
On the other hand, if you kept good records of where you spent your money, then you’ll be able to complete a much more in-depth and reflective dive of your spending habits.
Here are some questions to keep in mind as you evaluate where your money went in 2018:
- What did you spend your money on?
- Where did you spend your money?
- Are you surprised by anything?
- Did you spend your money on the things that make you the happiest?
- Did you spend more money on certain things than you wanted to or thought that you did?
- Do your 2018 spending habits reflect your values?
- What adjustments do you want/need to make in 2019?
Complete A Review Of Your Saving
Just as with the review of your spending above, you don’t have to go back and evaluate every single dollar that you saved in 2018 but it’s good to have at least a ballpark estimate of how much you saved. Not only do we need to save for retirement, but there are other goals to save for as well including things such as an emergency fund, a new home, a new vehicle, medical procedures/bills, children’s college education, etc.
Were you able to save as much as you wanted to? Knowing the percentage of your income that you saved is a better measure than the dollar amount (although it’s better if you know both).
The reason that it’s important to know where you spent your money and how much you saved last year is to make sure that it aligns with your values. If you have a dream of buying a home for your family in 2020 but you bought a brand new car in 2018 when the vehicle that you had still ran fine which means that you didn’t save anything for a down payment, then this goes to show that you didn’t always keep your money values and long-term goals in mind.
Knowing where you spend your money, and if it really aligns with your values, can show you if you have more room to save. You can use that information going forward to be more intentional with your money to help make sure that you reach your goals.
Create Processes
Create processes to make things easier on yourself and help make sure that you’re successful. It’s fine to create goals that you want to reach for the year, but without processes in place to reach those goals you’re probably not going to accomplish them.
Want to save 10% of your income in 2019? Setup automatic savings to help make sure that you reach that goal. You can setup payroll contributions to your 401(k) or other employer-provided retirement account as well as automatic contributions from your checking account to your savings account each time you’re paid. By automating your savings you’ll be “paying yourself first” and won’t be tempted to spend the money. You can do the same things by automating any debt payments and other bills that you have.
Want to travel more this year? Set a process goal of reviewing your spending and budget on a weekly basis to determine if you’re on track or if changes need to be made.
By reviewing your spending on a weekly basis you’ll be in-tune with where your money is going and you’ll be able to adjust on the fly. If you have a significant other or spouse, then set a specific time each week to sit down and reflect on your finances over the past week as well as discuss your finances for the week ahead.
Be Consistent
It may be cliché, but it’s cliché because it’s true: consistency is key. Don’t set your process goals and then let them fall to the wayside. You have to be diligent in going through your processes on a consistent basis (daily, weekly, monthly) to make sure that you reach your broader, long-term goals that your processes are in place to help you achieve.
Whether you reached all of your financial goals in 2018 or you didn’t reach any of them, a new year represents a fresh start. Reflect on last year’s financial situation and whether what happened accurately represents your values, your goals, and if it helped to properly prepare you for the future. Put processes in place to keep yourself accountable and track your progress and make sure that you remain consistent in following those processes through so that you’ll be successful in reaching your 2019 financial goals.
