As the year roars to a close, it’s only natural to think about what lies ahead in 2017. Before you look forward, however, consider taking time to reflect on the year that was. Answering a few simple questions about 2016 could put you on the right track to a prosperous 2017.
What did you learn from 2016?
Celebrate your victories. That’s right, pat yourself on the back for all you did accomplish financially in 2016. Gloat. Make a list. Maybe you set up a 401K account at work. Perhaps you started following a monthly budget or cut down on frivolous spending. Whatever the financial win, take the opportunity to celebrate it.
At the same time, be willing to learn from your mistakes. Of course, we’re all afraid to admit our mistakes. They seem like sign posts, pointing directly to our weaknesses. But, instead of fearing mistakes, learn to appreciate them, for your mistakes are the exact learning opportunities that will make you more successful in the future. What were your biggest financial blunders in 2016? How will the lessons from these mistakes help you in 2017?
Where are you now?
Take stock of your current financial situation. Before you move forward you must understand where you stand now. Exactly how much debt do you have? How much are you bringing home? Most importantly, calculate your net worth.
Your net worth is the sum of all of your assets minus the sum of all your debts. Assets are things of value like your home, cars and saving accounts. Debt is everything you owe, whether it be your mortgage, credit card debt or student loans.
Your net worth is the score card you’ll use to monitor your financial progress. Your goal in 2017 will be to make moves that increase your net worth.
Where do want to be?
What does financial freedom mean to you? Do you want the freedom of having savings in the bank, money in your retirement account or the ability to take a vacation whenever you like? Whatever your vision, you must write it down. You must turn your vision into a goal with a real deadline, otherwise your vision becomes nothing more than a dream. I suggest turning each one of your financial desires into a SMART goal – Specific Measurable Authentic Realistic Time limited.
Don’t just decide that you want a new job that pays more. Instead, your SMART financial goal should state: I will obtain a job in my field of work that pays me a minimum of $70,000 a year; I will find this job within the next eight months.
Instead of deciding that you will buy a home in the future, turn your desire into a SMART goal:
I will purchase a home located in a good school district within a 40 minute commute of my job. The purchase price will be between $250,000 to $350,000, and I will save $50,000 for a down payment. I will purchase my home within three years.
What are you willing to give up?
We often have a clear picture of what we desire, but we never take a close look at what we’re willing to give up to get it. Perhaps you want to start your own business, but you spend two to three hours a night using Facebook or watching Real Housewives of Atlanta. Until you decide to give up something less valuable to you (using Facebook or watching television) to obtain something more valuable to you (time to start your own business), you’ll always be in the same place. Take the time to decide what you’re willing to give up to obtain what you truly desire.
What is keeping you stuck?
In any potential endeavor, there is always one sticking point—one hurdle that if we overcame would make achieving our goal attainable. Perhaps you would like to start your own business but have been procrastinating getting a business plan together.
Maybe you’d like to start investing but don’t know the difference between a stock, IRA or 403b. You’d like to get a raise but still fear taking the exam for the certification that would lead to your promotion. Think hard. Identify the one thing that is holding you back, and decide to attack it with everything you have in the new year.
Use your reflections of the past year to springboard your efforts in the new year. Most importantly, believe in yourself. Give yourself permission to make 2017 your best financial year ever.
BMWK, what do you plan to do to make 2017 your best financial year yet?