When I teach Financial Planning to local high school students, I usually discuss “disappearing dollars”.  Just uttering this phrase causes several students to smirk and giggle.  But, the laughter is soon replaced by silence as they realize they could not account for all of the money they spent in the past 7 days. 

 Let’s examine some of the spending habits that I see with students:  Spending $5/day on coffee and a pastry.  Saving spare change in a jar.  Keeping cash in an account yielding 0.25%.  Spending $10/day on lunch.  Buying the latest exercise gear as soon as it comes out.  Saving for new tires on their car. 

 Which habits do you think are bad and which are good?

 Some of the students I spoke with were spending $15/day between coffee and lunch, not to mention how much they spent on dinner.  Spending just $15/day will cost them about $4,000/year!  In contrast, if they were to invest this money and earn 5% per year for the next 20 years, they would have nearly $140,000.  This just goes to show you that every dollar counts.

 We all have good spending habits and bad spending habits.  The key is to identify all of your habits and start taking steps so you will have more good spending habits than bad.  Get out a piece of paper (yes, you will need to do some work here) and create two columns.  One for good spending habits and one for bad spending habits.  How are your spending habits working for you?  Do you see some room for improvement?  Can you identify where you spent your money in the last week?  How about the last month?

 Setting Resolutions

 This year I am going to _____.  Millions of people will utter these words this month and many of them will even start working towards a goal.  Half of them will not accomplish their goals and more than a third of them will give up before the end of January.  Game over, right?

 Not so fast.  You can actually achieve your resolution and do so with confidence.  This is what I do for a living.  Just reading this article will give you a distinct advantage over everyone else.  This advice is so good, it almost isn’t fair to everyone else.  Do you have a goal you want to accomplish?  Then keep reading and get ready to start working. 

 You see, the problem is not about how determined you are or how much will power you have. Many of us have completed 5k’s, 10k’s, Marathons, and Triathlons.  So, why can’t we complete our financial resolutions?  The problem might be that your goal is not realistic or that you have not created an effective resolution.  When we set out to accomplish physical goals, do we just set a goal of “getting in shape”?  No, we research training plans and nutrition, purchase the proper gear, and hire a coach.  Then, we commit to a long-term training plan.  But how do we apply these steps to financial goals?

 First, look at the spending habits list you created earlier and mark each habit as a Need or Want.  Needs are things that are essential to our health and well-being.  Wants are things that might be fun but we can get by without. 

 Now that we have identified our spending habits and labeled them properly, let’s look at how to properly write an effective resolution.  When writing any goal or resolution, we need to remember to be S.M.A.R.T about them. 

·      S (Specific) – This is the what, where, why, and who.

·      M (Measurable) – How will you know you succeeded?

·      A (Attainable) – The goal should be a reasonable stretch, not too easy and not too hard.

·      R (Relevant) – How important, or meaningful, is this goal to you?  Rate how meaningful the goal is to you on a scale of 1-10 with 10 being most important.  Here is where many people fail.  Too often people pursue goals that were recommended by someone else whether it be a friend, family member, or some clown writing an article (hey, wait a minute).  The point is that you are much more likely to achieve your goal if it is important to you. 

·      T (Timebound) – When do you need to take action?

 Which one of the following goals meet the S.M.A.R.T criteria?

·       I want to lose weight.

·       This year, I will do better with my money.

·       Within the next 6 months, I will save $5,000 in my Emergency Fund. 

 Working with a Financial Planner can take these worries off your shoulders. To see how it might work for you, answer these 12 questions.  It’s a free assessment that will paint a better picture of your current Spending Habits and uncover areas we could work together to improve.   

 We all have different values when it comes to money.  This is the reason money is such a great stressor in relationships.  The key is to start working towards short-term, meaningful goals, and begin shifting the majority of your spending habits to good habits.  Contact me if you would like to start working to accomplish your Financial Resolutions.