The end of January often means the end of our well-intended attempts at keeping New Year's resolutions.
Join us as we talk about how to set money resolutions that actually stick, and how to change your finances without changing who you are.
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Brenton: It's the start of a new year. And like most people, your mind is on how to become a healthier person, a more fulfilled person. And in our case, even a wealthier person. In this episode, we talk to you about new year's financial resolutions, how to set them and how to stick to them in ways that will benefit you financially.
Let's get started.
Hello. My name is Brenton Harrison of new money, new problems, and your host for the new money, new problems podcast. It is early 2023 when we're recording this episode. And if you are like most people, the start of a new year puts you in the mindset of things you can change about yourself, about your behavior, about your life, to put you in a better position at the end of this 365 days.
In this episode, we're going to talk about some ways to set new year's resolutions that will stick and some specific things at the beginning of each year that I do to put myself in a better position financially.
This is my 14th year in financial services. And the benefit of being in this industry [00:01:00] for so long is that you get to see a number of different financial circumstances.
And one of the things I've noticed in observing all of these different situations is that there's a radical difference between trying to implement changes that take into account how you live your life and trying to implement changes that change the way you live your life.
Because it's very hard to change the way that you're intrinsically wired to address your finances.
If you are looking at the way that you are intrinsically wired financially, and you're setting financial goals that are trying to change that wiring, it's not something that can be easily done, especially, because for the typical listener of this podcast, You are doing just well enough that finances are not the first thing you think of when you wake up in the morning.
Now you may be in a precarious financial situation, but if you're listening to this podcast, you're probably not on the line of having something to eat for lunch and trying to figure out if you can hold yourself over until the next day. That's not the level of disparity that we're talking about. [00:02:00] If you're not in that level of disparity and you're just stressed, but you're still earning a hundred, 200, $300,000 a year, your finances are something that are important to you. But it's still something that you address after you've taken the kids to school after you've done a full day's work after you watched a couple episodes of Seinfeld or insecure or insert your favorite sit-com here. And when you're trying to radically change your wiring for something that's on the periphery, it's unlikely to last for a long period of time.
So when it comes to setting financial new year's resolutions, automation is the key to making sure that our behavior is not the impediment to the wealth building process. And there's a number of things that you can put in place to make sure that even when you're not paying attention to what's going on with your money, there's something going on in the background where that if a problem arises, you can be notified and address it when it has your pressing attention.
Using automation to your benefit could be something as simple as setting up an automatic transfer from your checking account to your savings [00:03:00] account. But rather than having some huge goal, maybe attacking something smaller.
Maybe it's a meal that I grab at a certain to go place every single Friday. When, if I just substitute that one meal it might save me 50 bucks a month when I look at how many times I go on a monthly basis. And by diverting and reallocating that money to my savings account, I can pat myself on the back and say that at the end of this year, I will have saved five or $600 that I wouldn't have saved prior to identifying that expense. But there are all types of other services like identifying all of your automated subscriptions, which we'll talk about after the break and trying to find ways to reallocate the mess and the miscellaneous things in your budget that can help you build wealth.
Using services like mint.com. Like you need a budget, like insert automated tracking software here can make sure that whenever you meet that limit of what you set for yourself, you get an email or a text message that can serve as that corrective [00:04:00] behavior that lets you know, what's going on without you having to have the discipline of sitting down on a monthly basis to find out that you overspent. We're trying to build in systems that will alert us to when we're acting counter to our financial goals.
Another thing that I tell people to avoid, is also making sure you're not setting goals that treat an element of your finances as if it operates in a vacuum. . Everything that you do in one area of your finances impacts other areas as well. And when it comes to new year's resolutions, you can be very motivated at the beginning of the year to do something like tackle debt, to do something like increase your savings to do something like increase the amount you save for retirement. And because that's the thing that's pressing on your mind, you set a very high goal for yourself that does not consider the other things going on in your finances.
You might be really motivated about increasing your cash cushion this year. And last year, it could have been highly possible for you to say $250 [00:05:00] every two weeks. And you say every two weeks, I'm going to have $250 taken out of my check and go straight to my savings. I'm not even going to touch it, but because you're not thinking about this part of your finance affecting the other parts of your finances, you could have neglected to realize that your child's going to a new school or has a new tutor or new afterschool program that made that $500, not as realistic this year, as it would have been last year.
And when setting financial goals for the new year, you need to make sure that even if your goal addresses a particular element of your finances, you've looked at what else is going on to determine whether that's actually realistic.
And lastly, something that could make it easier for you to reach your financial goals as opposed to making it more difficult to do so is getting some momentum moving downhill. You want to start January one with a financial goal that has the easiest thing to do at the start of the year, as opposed to having to take the biggest bite of the elephant on January one.
Akin to the types of things that you see in atomic habits, where it tries to get [00:06:00] you to identify a small behavior that you can change and do every single day. When you have something small, something tangible that you can do over and over again, eventually becomes a part of your character and it allows you the discipline to attack those things later on in your finances that realistically you may not be positioned to attack on January one.
After the break, I'll tell you some specific things that I do with my finances every year. And I'll even issue you a 30 day challenge where you can work with us to make tangible improvements in your finances in a month time.
A few years ago, we had a group of my clients and friends who wanted to do some things together that would improve their finances.
And it led me to create something called the 30 money moves challenge. And the 30 money move challenge is a 30 day challenge where every single day you get a video from me that gives you a challenge for that day, a money move for that day. It's designed to take less [00:07:00] than 30 minutes every single day.
And it addresses various parts of your finances, such as budgeting, such as insurance, such as student loans, such as your retirement planning, even estate planning. And we believe that by breaking it up into bite sized bits, you can have some tangible progress in a way that doesn't overwhelm you all at once.
And some of the things I'm going to share with you now are challenges from that program that I do myself as a way to clean up my financial junk each year.
The first is every single year I go through the process of identifying any bill that has auto drafted from my account. Now, like everybody else, there's things that are auto drafted, like gas or electricity and utilities, but there's also things that I sign up for every year and don't pay that much attention to.
Maybe I signed up for apple plus, cause I wanted to watch the morning show. Or something that's a larger expense, like an insurance payment whereby identifying it and figuring out how much it is. It might spur you to do some shopping and seeing if there's better things out [00:08:00] there.
I do this process manually. For some reason, it gives me some peace and satisfaction by marking out with the highlighter, but we'll put some in the show notes companies who will do it for you, they'll comb through your expenses and they'll identify all of those auto debit payments.
And many of them also have budgeting features that will notify you when you overspend in in key categories.
The next thing I do each year is identify a safe physical, and digital location to keep my important financial and family documents. These are things like my son's medical records. Maybe my last will and Testament. Insurance policies, anything that I want to make sure that I, or my family can find in a pinch.
I want to make sure that every single year I know how I can access it, but I also include a physical location, like a safe where I know where the key is. I know what the location is. My wife knows where the key is. She knows where the location is, so that if something were to happen to me, there's a centralized place where everything that's important can be found.
Next something that I do every single year is I [00:09:00] consider and place a dollar value on an hour of my professional and personal time. My financial services mentor is a guy named Marcus Henderson. And one of the first things he told me when I was trying to get into this business and try to build a practice for myself is that I needed to know what an hour of my time was worth, because it will give me an idea of what type of tasks I should be doing and what type of tasks I should turn away from, or I should hire someone else to do.
And as a business owner, you have to not just consider what you want to earn. You have to consider what percentage of what you earn actually reaches your household.
I have people who work for me. So every dollar that I bring in does not come to my house. I may bring home 60 cents on every dollar that I bring in, which means that if I'm working with someone, I have to earn even more than my hourly rate to make sure that I net my hourly rate, once I've paid all of my necessary business expenses.
If you decided that an hour of your professional time is a hundred dollars an hour and your employer is only willing to pay you [00:10:00] $75 an hour, you might've just decided that you need to go find another job. Or if you want to be paid a hundred dollars, but the market says you're worth 75, you might've identified that you need to get some more training. You need to get some more experience. Maybe you need to get another license or certification to add to that resume, to make sure that you're meeting the hourly rate expectation that you have of yourself.
This goes beyond the professional world as well. If I've decided that an hour of my professional time is worth $200, I might decide that an hour of my personal time was worth a hundred dollars. So now if I'm looking at my house and it's a mess, and I know that it would take three hours to deep clean my house top to bottom, then that three hours is worth $300 of my personal time. If I find someone who's willing to clean my house and they're going to charge me $50 an hour,
I've saved $150 and probably saved myself some stress and preserve some energy by using them to deep clean my house, as opposed to using my precious time at home, to do a job that I've determined is [00:11:00] valued at less than my personal rate.
Along those same lines. Every single year, I try to consider a way to increase my human capital. This is a term that came from a friend of mine, Courtney Hale. I don't know if he invented it, but it's the first place that I heard of it. So I always give him credit. But human capital are the things that you can put on a resume. The things that you can say are a skillset that you have, and all of those things help dictate your worth in the marketplace.
Even if it's not about dollars and cents, there is always value one way or another in adding another tool to your professional toolbox and being able to confidently say that I'm a better professional at the end of the year than the one that started the year.
I get a lot of pride at being able to talk to somebody and objectively say that I do what I do at a high level, and I want you to have that same confidence yourself. And it all starts with every single year, finding a way to increase your human capital.
And lastly, get a piece of pen and paper. Sit down. Have a sip. Or a bite. [00:12:00] Or a puff. Of whatever gets you in the right frame of mind. And ask yourself, honestly: what is the biggest thing getting in the way of you reaching your financial goals?
Is it your human capital? Do you need to be honest about yourself, that in order to get where you want to go in terms of your earning, you need some more training. You need some more expertise that right now you don't have? Is it your budget? Are you like me? And at times you can lose the value of a dollar and you can spend without thinking to the point where you go deeper and deeper than you ever expected to be in terms of your monthly expenses?
Is it a conversation with your partner? Are you all so disconnected financially that it becomes impossible for you to pursue financial goals together?
Whatever it is, come to a resolution of what that obstacle may be, and also figure out how you're going to address it in a way that allows you to actually reach your end destination. These are the things you can put in place to make sure you have a [00:13:00] financial goal and a financial resolution for 2023 or any year that sticks.
And if you like some of these things that I said in terms of daily challenges, I encourage you to take the 30 money moves challenge with me. We will put the link to the challenge in the show notes, you can sign up via email. Every single day you'll get a video for me, urging you on. And we'll start that process of not just changing behavior, but moving this financial ball down hill and really making sure that we're on that journey to wealth together.
I'll see you next episode.