Financial resolutions - Part Two
Peter McGahan
Monday 22nd January, 2024.
LAST week we covered the broad ‘why’ for New Year’s resolutions and why they simply fail (43 per cent by the end of January). Don’t worry if you haven’t made any this year, you can do them now. The timing is meaningless and not psychologically holding.
In terms of financial tips, in 36 years of financial planning, it’s always been about that the ‘why’ and applying simple habits regularly. That, of course, is the same as a sportsman going for a title, a Yogi trying to bend more, a student trying to get through exams, or all of us just aiming to shed a few pounds after Christmas.
The starting point is to take a deep breath from the crazy world and decide what you want and when.
And so, managing our finances must start with putting a filler in each of the holes of our leaky buckets rather than sweating our lives away trying to keep refilling them. It’s tiresome.
What are the holes?
Keep it simple: Don’t look for magic - the crazy solution in the distance - look for the simple things at your feet, then repeat them over and over. If you study the old ‘Acres of Diamonds’ story, you’ll get the drift. A wealthy farmer sold his land and went in search of diamonds for financial gain elsewhere, and came back penniless with no success, only to find the land he had sold was indeed a massive diamond farm. Diamonds aren’t obvious at first, as they are rough, black and need a bit of care and cleaning.
Look at the financial situation in front of you first and simplify it. Clean it up and apply the correct consistent disciplines. Trust me, taking care of the pennies means the pounds will take care of themselves, as my late mother always advised.
Comparisons - turn off all comparisons if you haven’t already. Social media and TV just tell us that the person next door is better than you because they have ‘something’. They aren’t and they don’t. Your epitaph will not read that you were better than X per cent of the population. It won’t.
In the end, we will all just recite memory after memory not possessions. When I asked my oldest if she remembered my late mother, she said she could and that she was great. When I asked why, she responded with “she did stuff with us”. She couldn’t remember any presents. None.
Value - measure things you ‘need’ to buy by their value in terms of the gross cost to you ie: how many hours do you have to work to achieve that sum of money. Now value that against the things you really value ie: the time you could be spending with the people you love or the sport, pastime you love, or just time with you. Is the purchase really worth it that you would have to spend that time working and missing out on what matters to you? Measured as time, money means something very different.
We all know we can buy an item which gives us a dopamine boost for a small amount of time but that is short lived and is followed often by regret. Post purchase dissonance occurs when our beliefs and behaviour clash with each other. That feeling of regret can mean that we have further needs of dopamine from other spending to make us feel better again. It’s an endless downward spiral that can soon fill up a credit card.
Where is the spending need coming from? I’ve covered it before, but if you search ‘what are the human givens’ you will see the nine emotional needs that each of us should have fulfilled in our lives to feel socially complete. If they aren’t complete in healthy ways, we tend to fulfil our needs in unhealthy ways and spending can, and often is one of those.
Next week I’ll cover the financial holes in your buckets to ensure you have them plugged fully.
For a complimentary financial health check, please call 01872 222422 or email info@wwfp.net or visit us on www.wwfp.net
Peter McGahan is the Chief Executive Officer of Independent Financial Adviser Worldwide Financial Planning. Worldwide Financial Planning is authorised and regulated by the Financial Conduct Authority.
