Start 2020 prepared, ready and willing to have a great financial year by following these new year steps.
Review 2019’s financial outcome
What did your money get up to in 2019? What went well with your finances and what didn’t?
Start by identifying where you spent your money. Take some time to track down what your money was doing each month. Be very vigilant about noticing where you may have unconsciously overspent or been frivolous with your money, Weirdly it is also good to note when exactly this happened in the year. For some reason March and September are the months that my spending monster kicks into overdrive. I have no idea why but because I know it happens I plan to be extra watchful this year and make sure my why and my goals stay at the front of my thoughts !
Identify expected large expenses which are likely to recur so that you can plan for them in advance. This is another one that I am especially bad at. This year is going to be a good year for pre planning – no more last minute holiday booking stresses!
Highlight expenditure that really created a strong emotional impact either because it was stressful or because it was something that you really valued. Note how you can minimise the impact of the stressful expenses this year and get more of those that really added value to your life.
Armed with the knowledge of your 2019 financial review start building the picture of how you want your finances to look in 2020.
Write down your financial goals for the year
Try to stick to three big financial goals, More than this and we can easily go down the road into overwhelm with the side effect of an inability to act.
While we are drugged with the euphoria of the New Year and a clean slate it is easy to create a mammoth vision for ourselves. To achieve our goals we need to be able to truly buy into our ability to reach them. Make these three goals realistic but still keep a good degree of stretch and set some reasonable timelines for achieving them. How do you eat and elephant ? One mouthful at a time, so break your timed goals into bite sized micro-goals that you can track and complete.
Keep your goal schedule somewhere where you can see it everyday.
But don’t get fixated on the goals. These are meant to be flexible, life happens and sometimes what seems a stretch goal becomes easily attainable or alternatively beyond reach. Don’t limit your vision but similarly don’t create unnecessary stress for yourself and if you find you need to adjust your goals as you progress, do so but keep your ultimate financial objective for 2020 in sight. And don’t let a slip up be an excuse for letting the mean girl voice out in your head, I know she loves to chime in and has a lot to say about everything, including how you should “just give up”. Don’t let her win this time, you have got this !
Create a conscious spending plan making sure every pound is accounted for.
Based on your analysis of how 2019 went you have a very good idea of what expenses are necessary and recurring, include these in your plan. Don’t forget to include the big expenses that might be overlooked in the budget and be sure to make an acceptable allocation for the fun stuff. This is a non negotiable – you need to have a fun budget, be creative to keep the costs down if you have too.
Cancel non essential payments and look to reduce regular expenses either by switching (or threatening to!). The suppliers have no loyalty to you as a customer so don’t hesitate to get a better deal. The usual negotiable suspects are Wifi, data streaming services, insurance and utilities.
Make a big dent in expensive debt this year
Getting expensive debt out of your life is the rocket fuel to building your net worth and changing your financial circumstances.
As painful as it is, get clear on your debt, understand how much you owe and which debt in that number is expensive debt (the debt with a high interest rate), You now have set a target for yourself and know what the mountain you have to climb is. This unleashes your creativity and sets you up for taking the first step to becoming debt free. Use this creativity to come up with ideas on how to attack this huge consumer of your money’s energy.
Where you have found extra cash in the analysis of your cashflows, either through eliminating unnecessary spending or reducing costs, use this new found excess cash to repay expensive debt.
Identify other sources of potential additional cashflow;
- Sell items that you no longer use or never did and use this windfall to pay debt.
- Start a side hustle or consider seasonal part time employment to generate more income.
Be brutal and determined. Debt is literally blocking your money’s ability to work for you. Free your money to use it in the business of building your wealth
Plan to save and invest that little bit extra this year
Set relatively ambitious saving and investing targets for 2020 and get creative on how you are going to reach them.
If you have no debt or have at least paid down expensive debt, allocate some of your new found excess or new earnings to increasing your pension and/or your other investment accounts such as your stocks and shares ISA in the UK.
Decide to stop financial procrastination
Identify the financial tasks and chores that take you forever to get around too. Or those that you never seem to have time for. Split them into Critical to do’s, Have to do’s and Nice too have’s.
Set deadlines for getting your outstanding administration chores done in order of importance. A tax return for example is a highly important unavoidable task. In the UK these are due end January. Set the deadline for this one at least one month in advance.
Be committed to ticking these off as you have planned. Get accountability by roping in a friend or family to keep you to this plan. And make sure you celebrate the completion of each chore. You deserve it! But this is not an excuse to blow the budget ! (An important note to myself!)
Incomplete to do lists drain our energy, lead to stress and can ultimately cost us financially if we don’t get them done on time. 2020 is your year. Get them done!
Declutter your financial records and your environment
Keeping well organised financial records supports us in our financial goals. Well ordered and easy to find items ease our ability to keep the focus on what is important – Reaching our goals.
Similarly a cluttered environment leads to disjointed thinking and overwhelm. So much of the psychology of achieving our goals is about removing the barriers and obstacles to reaching them. A cluttered mind is not conducive to zeroing in on the goal and using resourcefulness in attaining it. Spend a little time getting your documents in order and remove any potential barrier to your success.
Reduce your Spending footprint
Mindful spending, directing our money to our goals and the focus of building our wealth can all seem very self centred. However if we see this as an efficient allocation of our resources within the wider picture of more efficiently, effectively and sustainably using the world’s resources it becomes so much more and bigger than our simple wealth building.
Being more mindful and moderate on what we choose to spend our money on sets us up for being more mindful on how we spend the worlds resources ultimately building an efficient wider ecosystem.