New Year’s Resolution: Financial Health?
Ready for 2021 anyone?
As we say goodbye (good riddance?) to 2020, we turn our gaze to 2021. New possibilities. New ideas. New resolutions.
What are you hoping to accomplish during 2021?
A common theme for New Year's resolutions is health. Losing weight. Gaining muscle. Eating better. Taking more vacation days. Finding a church.
I have a humble suggestion. How about tending to your financial health?
Could this be the year when you get your finances in order? Or when you start saving more money in your 401(k)? Or when you finally get around to setting up your estate planning documents?
In short, will you prioritize your financial health?
I believe financial health is an important component of our overall health. Taking steps toward financial health can add so much to our lives: reducing stress, increasing opportunities, and helping us live better lives.
I talk about this a bit more in this video:
So Keith, what exactly is financial health? And how do I improve it?
Glad you asked.
There are many areas to think about when it comes to finances. I came up with this Circle of Financial Health to try to show the various areas to consider:
There will be differences in how these areas apply to each person, and different people will have other, more specific areas to consider. But I believe these are the primary areas that should be addressed on an ongoing basis.
The order in the Circle of Financial Health isn't necessarily important. But it's crucial to note that each area affects the others to some degree, so it really helps to look at the entire picture holistically.
Figuring out how to deal with these various areas, of course, is easier said than done. Addressing each area is not a one-and-done thing, but rather an ongoing process.
So, where to start? Here are a few ideas of specific goals you could set for the upcoming year:
Increase your savings rate to at least 10% of your income.
Pay off your credit card debt.
Get a better handle on how you’re spending your money.
Purchase a home.
Set up a will.
Perhaps 2021 is the year when you can put a little more emphasis on dealing with your financial health. Maybe even, deep breath, a lot more emphasis.
If you do, your future self with thank you.
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