January is always a month filled with hopeful new beginnings, and following the challenges of 2020, so many of us are searching for ways to start fresh this New Year. When it comes to your financial health, one of the best resolutions you can make is this: don’t make the same mistakes twice. Despite this age-old maxim, Wealth Advisors see many of the same mistakes repeated year after year, even by very smart people who have been very successful in their careers, relationships, and lives. To get your financial house in order in 2021, here are some tough love suggestions for the 10 best financial resolutions to make this year:
I will not let my political views direct my investment decisions.
Despite the commentary that always comes with a change in presidential administration, markets don’t care what party is in office. Want proof? Check out this terrific interactive exhibit examining market and economic data since 1926, which shows a consistent upward march for US equities regardless of who is in the Oval Office.
I will stop trying to out-guess the market.
Stop trying to be a market guru and trust the overwhelming evidence that attempting to beat the market or pick the next best stock is a loser’s game. Decades of research prove the futility of trying to time the market.
I will manage my work stress.
You work at a stressful job so you can make enough money to be less stressed! Do you see the irony in this? If your job or career is not suited for you, the best financial advice is to find another career where you can love your work. The right livelihood usually results in higher earnings and better health. If changing your career is not an option, commit to finding ways to reduce your stress levels.
I will be clear-eyed when revisiting my past successes and failures.
Don’t mistake your financial successes with skill and your failures with bad luck. While there is always some element of luck involved, (case in point: inheriting money does not necessarily make you a smarter investor), generally those who save consistently and invest prudently tend to do very well over time.
I will honestly assess my risk tolerance and act accordingly.
You imagine yourself being “greedy when others are fearful” (i.e., following the advice of Warren Buffet), but then shrink with fear when the market drops 4%. Don’t fool yourself into thinking you are more of a risk–taker than you really are – think back to 2008 or even just last year and consider what you did then. Prudent investing means that sometimes you will lose money, but staying the course has always proven to be the most successful long-term strategy.
I will respect my hard work by making and following a sound financial plan.
You work so hard at making money, yet don’t take the time to plan your finances. Most people spend more time planning vacations than they do their financial futures! Spending the time to create a plan to reach your financial goals is the best way to honor your work.
I will ask my financial advisor how he or she gets paid.
Ask your advisor if he or she is acting as a fiduciary on your behalf. Fee–only advice from an experienced and qualified advisor equates to objective, impartial counsel. Be wary of commissions, as they can encourage more trading than necessary and can get in the way of putting your best interests first.
I will not make assumptions about the finances of my friends and neighbors.
You think that your neighbor is living the high life because they are investment geniuses, but the truth is they inherited a lot of their money. Or they may be living beyond their means and are deep in debt.
I will not allow my emotions to determine my financial decisions.
Your pessimism about investing stops you from making smart investment decisions, so you do nothing instead of taking control of your finances and getting needed help.
I will seek out the advice of experts.
You trust a doctor to manage your family’s health, an attorney to help you with your estate plan, and a mechanic to fix your car, right? Find a wealth advisor you trust and who has your best interests at heart to create a plan to help you reach your financial goals.