As dawn breaks on another new year, many people are looking to 2022 for a fresh start and envisioning how to achieve their goals.
But as we’ve all experienced, a couple months go by and the motivation fades, reality sets in, and we fall into old habits that produce the same old results. As the saying goes, “your system is perfectly designed to produce the results you’re getting.”
So, if you want to break out of the malaise of your old system, here are 3 tips to create a new framework and improve your financial health in the new year.
1. Discover your financial values
Finances are a tool, a resource to fulfill your deeper life purposes. Having more money is not a purpose in and of itself. It’s a good goal, but only to the extent that it serves as a means to some greater end. Discovering that greater end – the “Why” of your financial life – is the cornerstone to building habits that last. Motivation is high whenever we set a new financial goal. But when that motivation fades, and you’re tempted to slip back into your old ways, focusing on the deeper values behind your finances will keep you going.
Mountains of literature have been written to try to uncover the values underlying financial decisions. Simply ask yourself questions like “Why is money important to me?” and “What do I want to accomplish with my money?” Uncovering your financial values will then set the stage to create specific financial goals that emerge directly from your values.
2. Define goals to align your finances with your values
Most financial goals are set because they “should” be done. You “should” budget. You “should” save for retirement. You “should” avoid credit card debt. However, goals that are not connected to underlying values often fall by the wayside. When that “should” conflicts with an immediate “want,” the “want” wins.
That’s why this is step two. A goal-setting conversation is productive only after you uncover your financial purpose. Rather than having the goals you “should” have, setting goals that are connected to your values reframes the eventual conflict. Instead of “should” versus “want”, it becomes immediate want versus enduring value. When that becomes the question, it is easier to say no to the immediate want because you’re saying yes to something bigger.
3. Determine the next smallest action – and do it
When I first started developing financial habits, I would create these audacious goals that were difficult to achieve. Without fail, I would either become overwhelmed by the size of the goal or burned out trying to do too much at once. That all changed when I received some advice that has stuck with me: Determine the next smallest action – and do it. Then repeat. Don’t worry about step 7, 8, or 9 if you’re just starting out. Cross that bridge when you get there.
For example, if your goal is to save $X for retirement, eventually you will need to determine what investments you want to make to get there. But choosing investments can be daunting, and there are several steps to take before getting to that point. So don’t worry about the investment decision yet. The first step would be to choose what kind of account would best serve your goal. Do that. Once you’ve made that decision, actually open the account. Boom, two tasks done. Then, evaluate how much you want to contribute and set up an automatic contribution. Three down, and now you’ve got momentum to tackle the investment decision. Focusing on the next smallest action can help us build momentum and confidence so that when it’s time to accomplish the task that was previously daunting, it’s a bit easier.
Each new year comes with its own new set of possibilities. These tips will help you turn those possibilities into reality.