While a vast majority of Americans make New Year’s resolutions, very few of those resolutions are lucky to make it to the month of February with a pulse. The major problem I see with financial resolutions is that they require too drastic of change over a short period of time, making it unlikely for the goal to be achieved. I could tell you to pay off your debt or save more for the future, but we all know that goals are likely to fail unless there are smaller and more achievable steps to take along the way.
Here are five New Year’s financial resolutions that, while easy to achieve, will collectively have a big impact for you in 2017.
Resolution #1: Set financial goals
You harp on your patients about having specific, measurable goals that over time will put them on the path to achieving better health. You should also be doing the same with your personal finances. Whether you are $250,000 in debt or on your way to having a net worth of $1 million by the age of 40, financial goals give purpose to your spending. Here is a financial goal setting worksheet to get you started.
Resolution #2: Increase your financial IQ
Read at least one personal financial book in 2017 that will get you thinking more about this topic. Here are three of my favorites: The Millionaire Next Door, by Tom Stanley, Think and Grow Rich, by Napoleon Hill, and Rich Dad, Poor Dad, by Robert Kiyosaki.
Resolution #3: Bring in some extra cash
If you are trying to pay off debt, build an emergency fund, save for a down payment on a home or jumpstart retirement savings, a small spark can go a long way toward achieving a goal. My challenge to you is to make a commitment to bring in an extra $1,000 of income in the next 90 days. Whether you pick up some extra shifts at work, ask for a raise, sell some stuff, self-publish and sell a book, or do something different all together, get after it!
You are probably thinking: “Does $1,000 really matter that much?” If you were to invest $1,000 today in a Roth IRA and the money were to earn 8% growth over the next 40 years, that $1,000 would turn into almost $25,000 tax-free. Or how about paying off debt? If you assumed that you were in the standard, 10-year repayment plan, had $100,000 in student loan debt at 6% interest, and were able to pay $83 extra per month ($1,000 per year) starting this year and continuing (because you will keep the momentum going!), you will save more than $3,000 in interest and have the loan paid off almost 1 year earlier.
Resolution #4: Read a debt free story
If you are trying to pay off debt and need some inspiration, read at least one debt free story to learn more about the behaviors and characteristics of pharmacists who were able to pay off six figures or more of student loan debt!
Resolution #5: Start an emergency fund
According to the Federal Reserve Report on the Economic Well-Being of U.S. Households, 47% of Americans could not cover an emergency expense costing $400 without having to sell something or borrow money. Make a commitment today that you will not be a part of that 47% by saving at least $400 over the next 3 months to get an emergency fund started. While the end goal will be to have an emergency fund equal to 3 to 6 months of your monthly expenses, use this $400 to get the momentum started.
Your financial questions wanted!
Do you have a financial question? Please submit it to firstname.lastname@example.org with the Subject: Your Financial Pharmacist. I will answer your questions in future issues of Transitions. Best of luck with your 2017 financial planning resolutions. You can do it!