How do you go about setting financial new years resolutions that you know you will stick to?
88% of us unfortunately fail to keep to our New Years goals according to British psychologist Richard Wiseman. However why not approach it by breaking things down into smaller achievable chunks preventing immediate failure and despondency. This could be baby steps. A 5km run, building to a 10km to a half marathon before you run a marathon and it's no different with setting realistic and progressive goals for investing.
Make it an achievable goal (and don't listen to the cheesy sayings!)
Starting out with the goal to double your money in a year is not realistic. Yes I know people say cheesy stuff like 'shoot for the moon..you might hit the stars' but unrealistic goals will just lead you to take unnecessary risks. You'll get frustrated and fed up. You'll try and over-trade. Pick a strategy and stick to it.
Worth checking out Gary Fox of the Entrepreneur Experiments talk with Jamie Heaslip for some practical examples of goal-setting and how he approaches it as a former professional athlete and successful investor. If you need a budget to decide what is achievable in terms of savings, how much you need to live on before you can automate into savings etc, you could take a trial of the You need a budget app.
Write them down
Investing author and podcaster Dave Ramsey talks about how the simple step of writing down your goals works like a switch, taking your goals from a distant dream to a vision that is ready to go to work. Yet, this important step is often overlooked.
According to Forbes physically writing things down helps on two levels, 'external storage and encoding' External storage is simply writing something down and is effective by way of providing a visual cue to regularly remind you of it.' Encoding is the biological process by which the things we perceive travel to our brain’s hippocampus where they’re analyzed. From there, decisions are made about what gets stored in our long-term memory and, in turn, what gets discarded. Writing improves that encoding process. In other words, when you write it down it has a much greater chance of being remembered.
Mark Murphy also adds that 'Neuropsychologists have identified the “generation effect” which basically says individuals demonstrate better memory for material they’ve generated themselves than for material they’ve merely read. It’s a nice edge to have and, when you write down your goal, you get to access the “generation effect” twice: first, when you generate the goal (create a picture in your mind), and second, when you write it down because you’re essentially reprocessing or regenerating that image. '
Change your habits
James Clear argues in Atomic Habits that changing habits instead of creating goals enables you to make positive changes. He offers a very strong case for this building on the work of Charles Duhigg and the Power of Habit. He suggests identifying the issues that may impede your progress and work around these. This could be as simple as the fact that if there is money in your bank account you'll spend it so instead set up a pension or a regular saver into a fund so the money gets' saved before you start spending it. If you don't feel like buying the book just yet at least take a look at his talk here.
Make life easier for yourself and where possible automate tasks that will work towards your financial goals. In terms of saving you could look at setting aside a certain amount every month to go into your pension, giving yourself the double whammy of tax relief and growth that compounds tax free. Use Revolut vaults to save money to your different vaults for different goals. According to Revolut you can also keep money the vault funds in crypto and commodities (if that's your investing preference). Closer to home MoneyJar offer a similar service.
Learn to Invest
Investing in the stock market, provided you are buying a diversified basket of stocks and holding over the long term will invariably outperform leaving your money in a bank account in the current low interest environment. It pays to be invested in the stock market and equally pays to invest in your investing education
Whether's its reading a book like The Smart Money Method (no relation to the Smart Money Series, just a good book) or Shares Made Simple or taking a course like our Investing Fundamentals make sure you invest in your investing education in 2021.
As always please make sure you receive independent financial advise before making any investments.