After the long year that has been 2020, 2021 is just a couple days away. This is a time when many of us reflect on the year we have had and think of resolutions and goals we can set for ourselves in the coming year. But just as it has been an unprecedented year, our resolutions for the coming year may be unprecedented as well.
A recent survey by OnePoll on behalf of Affirm, a consumer finance company, found some interesting trends. The survey asked 2,000 Americans about their ideas for the new year after all the stress from 2020. Overall, the survey found that many (68%) want to move away from “traditional” resolutions, such as going to the gym or losing weight. Another 63% said they believe their personal finances will be better off in 2021 than they were in 2020. So, what are those people aiming to do in 2021 to make that belief a reality?
Focusing On Cash Flow
Three of the more interesting resolutions all revolved around one thing – making better decisions with their cash flow. In the personal finance industry, many of us tend to focus on investing as the main contributor to financial success. In reality, having a firm grasp on our cash flow is far more vital. Below are three popular resolutions we could adopt ourselves to make our personal finances better off in 2021.
- Saving Money For The Future (62%) – Saving more of the money you earn is beneficial in multiple ways. First, it increases your savings for the future and gives you the opportunity to invest those funds and let your money work for you. Second, it inherently lowers your spending and cost of living. If you are saving more, you are spending less. As a result, more frugal spending will undoubtedly improve your financial situation.
- Planning to Better Budget (54%) – Living frugally is valuable, but to do so, you must know how you are spending your money. Budgeting is a dirty word in the world of personal finance, but it does not have to be. Ultimately, the value of budgeting is that it should give you peace of mind, knowing exactly where your money is going. Once you know that, you can align your spending better with what you value in life.
- Hoping To Pay Down Debt (49%) – Paying down debt is another important budgeting and cash flow decision. Debt and credit can be useful tools, but we never want to abuse our ability to borrow. Figuring out the best approach and strategy to paying down your debt can involve detailed calculations and involved conversations. A simple resolution to make some extra payments on your existing debt will have the same impact as saving more. Just like when you save more, you will improve your overall net worth and inherently lower spending and actual cost of living. You will also lower the total interest paid over the life of the debt. Again, if you are spending more on paying down debts, then you are spending less on other things, leading to a more frugal lifestyle.
These three financial resolutions will undoubtedly improve your financial situation in the coming year if you stick with them. They have the added benefit of not being dependent on the short-term fluctuations of the stock market. Now, let’s look at a few other resolutions people listed that aren’t finance-oriented that could have a positive impact on your lifetime financial success.
One of our greatest financial assets is one that is rarely ever mentioned. That is our human capital, or the present value of all the income we will earn over our lifetime. While nearly impossible to quantify with any real accuracy, we can certainly take steps and make decisions to improve the outlook for this asset. Those decisions would all revolve around our work. As time is one of our greatest allies for our investment performance, so, too, is it for our human capital. Regardless of our goals in terms of when we want to retire, working longer would undoubtedly improve our human capital. I would make the argument that the better our work-life balance, the less likely we are to hate working, and the more likely we are to work longer. This could certainly improve our financial situation in the long-term. So, what are some ways people want to improve their work-life balance in 2021?
- Spending More Time With Their Family (53%) – The relationships we maintain in our lives bring incredible meaning and value to them. If we focus on spending more time with our family, that will have a positive impact on our work-life balance.
- Traveling More (49%) – Given the lockdowns we have seen from the Coronavirus, it’s no wonder this is a popular resolution for 2021. We all want to get back out and enjoy the world around us. If we can manage to spend a little more time traveling in the coming year, it will hopefully lead to less stress in our work lives. In fact, many studies have shown a direct, positive correlation between vacation time taken and productivity for workers. So, make sure you use your vacation time!
- Having A More Positive Outlook At Life (58%) – I love this one. It is not a tangible goal we can measure and track throughout the year, but it’s incredibly valuable. Whether it is a daily reminder or a note to ourselves we keep in a common space, reminding ourselves to stay positive can lead to self-fulfilling prophecy. As an example, I keep a plaque in my office that shows the Serenity Prayer, one of my favorites that reminds me daily to keep things in perspective, stay positive, and focus on things I can actually control. Find what works best for you, but stay positive!
These are all fantastic resolutions for the coming year, and frankly, they all make sense given the year we have just experienced. Will we stick to these resolutions? Having a trusted relationship with a financial advisor can help. In fact, accountability is one of the incredible values we provide our clients at Patriot. Are you like 63% of the respondents who believe their personal finances will be better off in 2021 than they were at the end of 2020? If so, and you want to ensure that happens, we at Patriot would be happy to help. Reach out and see how we can make it a reality.
Happy New Year,