At my local yoga studio last month, the conversation among the staff was about the inevitable January influx of new members. Similar to gym memberships, they see a lot of new faces after New Year’s and then a pretty dramatic drop off after a few weeks as people lose steam in working towards their new goal.
I received several emails last month from financial services companies about resolutions for the New Year. You’ve probably seen something similar. Usually they’re in the form of a top 5 or top 10 list. While all the recommendations are generally sound, I’m not sure how realistic they really are, for these reasons:
- We don’t find time to implement all the suggestions given our jobs, kids, relationships, etc.
- Sometimes the suggestions require expertise we don’t have.
- It can be hard to know which suggestions are the most important given our particular circumstance.
I’m a big proponent of the “agile” methodology of software development and project management. Agile implies an iterative approach to making progress – small, achievable steps that can be completed in a week or two rather than large projects that take months or years. By tweaking things slightly, you can adapt more quickly and also benefit from the sense of accomplishment that comes from actually achieving a goal. Succeeding small is better than failing big!
So my suggestion is to start with one simple financial resolution for the year. It’s going to be different for each of you as it really depends on where you are on your financial path.
Open a high yield savings account
Many people have significant cash in their checking account earning virtually no interest. By opening a savings account online you can earn extra hundreds or thousands of dollars per year.
Fund your retirement account
Whether or not you have a 401k or 403b available at your job, there are other options (IRAs, Roth IRAs, HSAs) for putting away money that will grow tax-free until retirement. Each has its relative advantages depending on your age and tax bracket. Some will help you save on taxes this year.
Open a 529 account for your child/children
While there are a few different ways to save for your child’s education, I’ve found that regularly investing in a 529 plan can make a lot of sense for most parents who would like to save for their kids’ college educations.
Assess your current investments
When markets go up or down, the allocation of your various assets can change from what’s optimal. Re-balancing regularly (this should be once or twice a year but can be more often in times of volatility) will help you sell high and buy low and keep your risk profile aligned with your goals.
There are many other resolutions you can choose but my hope is that you’ll just choose one rather than biting off more than you can chew. Once it is complete, you can focus on another or just call it good enough for this year. The path to financial wellness is one step at a time.