In today’s day and age, changes are occurring every day. That’s never been truer than for your finances. That’s why we all need better financial habits.
In America, today’s lack of financial literacy is one of the biggest obstacles to personal wellbeing. Too many families suffer from crushing debt and negative cash flow, which can set up their retirement for failure before they ever get there.
The good news is there’s hope. It lies in the truth that you can improve the health of your finances by building better financial habits.
Ever made a New Year’s resolution? If you’ve ever followed through on a resolution, it’s almost certainly because you built an action around your resolution and stuck with that action until it became a habit. People fail their New Year’s resolutions by February simply because they fail to build habits out of what they want to achieve.
If you want to build a habit, you need three things:
1) A trigger for what activates the habit
2) An action for you to perform
3) A desired, tangible result
What new financial habits should you implement for your retirement? Here’s a few ideas:
Some people live and die by budgets and others run scared from them. No matter what camp you fall in, a budget can help you know how you’re doing on spending and what you can afford.
A budget takes time and commitment, but building a budget habit can be easy. Before you purchase anything (trigger), take a look at your budget (action for you to perform). There’s plenty of free budget apps for your phone or computer that can help you put together a monthly budget.
Once you’ve reviewed your budget, you’ll be able to either make the purchase with peace of mind knowing you can afford it, or you can have the power to walk away from the purchase since you now know you can’t afford it right now.
Knowledge helps empower our decisions. A budget is just that – knowledge for our financial situations at any point.
Some people have everything filed in meticulously-labeled folders, while others ascribe to the “shoebox method.” But surprising number of retirees don’t know where all their financial documents are.
No matter what you spring for, you need to know exactly where all your documents lie so you can review them regularly. Weekly, monthly, quarterly, annually – whatever frequency you choose, the trigger can be noting when to review on your calendar (trigger), then pulling all your documents from one place and reviewing them at once (action to perform). This way you’ll know when you need to update documents and stay on top of any changes.
One of the most useful things you can have for retirement is a plan for your taxes. As taxes change with a new administration, it’s important to develop foresight for how much you can expect to pay in taxes on your retirement income.
The habit here starts with getting a tax plan, but also reviewing it regularly with your financial advisor. They can update you on current and coming tax changes so you can stay ahead of the game.
The truth is you can build any habit you want. When it comes to your finances and retirement, those habits are more important than ever. With so much distraction and falsified facts in the age of information, healthy and cemented habits can keep you on track for the retirement you’ve always dreamed of.