It is 2021. I find it annoying that there are still tons of articles out there will tell you to write down New Year Resolutions such as paying off debts, spend less than you earn, set a budget, drink less Starbucks etc. It is 2021. You already know that. In the new era, it is not about finding information. It is also not just about finding the right information (6 Steps Wealth Karate). In the new era, it is making use of the right information easily.
Some of readers have shared with me they fall short of their 2020 financial resolution because they have the lack of clarity or strategy. I wish to take this one step deeper. It is not that you did not know what to do. It is also not that you did not know how to do. However, psychologically it is not easy.
In this article, I will be writing how to start a financial revolution so that you can create the right environment to win psychologically.
Now, all this can only be done after done this: You can only start 2021 properly after doing these 3 things. Start here first.
2021 New Year Revolution
To put yourself in the right environment, you need to first understand yourself. I summarized this by a quote that I frequently used.
There are three things extremely hard: steel, a diamond, and to know one’s self. ~ Benjamin Franklin
After understanding yourself, then you can create the right environment for success. You want to create a system that is psychologically easy to win. Here are 4 ways to put things in your favor psychologically. I bet you will not be able to find this easily elsewhere.
#1: Set Weekly Budgets Instead of Monthly Budgets
Ever wonder how we could save so much when we were students but not now? The trick is that most of the students are given a weekly allowance instead of a monthly one. When students then track their budget on a frequent basis, this creates a saliency effect. The more we noticed something, the more we are aware about it, the more we will review it.
For majority of us, we are now following a monthly budget. We don’t review it as often and so become surprised when we overspend during the 3rd or 4th week of the month. If budgeting is an issue for you (psychologically), set weekly budgets.
If you are planning for big ticket items, you can consider using this to help you. If you have spending issues, do read our Ultimate 4 Quadrants Shopping Guide.
#2: Audit Your Finances
Just like teachers marking the examinations paper for students, or MAS checking the quality of consultant’s advice, we feel a certain pressure and would want to make sure that our work is correct. It is the same for finances. It has came to my attention that most people don’t audit their finances at all. This means we will not know if we are on the right track when it comes to finances.
Auditing your finances is very simple. Just like a teacher marking each question, ask yourself if an expenditure is reasonable. Notice that I mentioned reasonable rather than “correct”.
For example, one of my friend have been subscribing to Spotify for $9.99 a month. He initially subscribed to Spotify because he wanted to listen to ads-free music on the way to work (I think that’s pretty reasonable). However, in March 2020 he has started to worked from home and he realised he has forgotten about it and is continuing to pay for Spotify but have not been using the service for the past 7 to 8 months. He has now stopped the payment but will be taking it up again when he needs to travel to work again.
I recommend you to audit your finances once every half a year. Spot those that are “unreasonable”. They could help you save a lot in the long run.
#3: Allocate More
Do this only after you have already prepared your emergency funds. After that, yes. Allocate more.
It is very natural to feel happy when you see your bank account increasing. However, you will only realised the effects of inflation after many years. I strongly recommend you to allocate more when you have the opportunity. Whether it is an insurance policy, an endowment policy, an investment policy or buying into stocks or property, I encourage you to add more when the time is right.
To psychologically help you, you can employ certain tools such as regular saving plans to deduct a similar amount every month. This automation will help you allocate more and yes be on your journey to financial freedom.
#4: Sell Things That Are New That You Don’t Want
Look around your house right now, I believe that there will be some items that have been there sitting in the cupboard for a while. Be it a gift from a friend or a book that have not been touched or a lucky draw that you have won, there will be some item that has been around but have not been used.
Take this opportunity to do some spring cleaning and make some money. Put it on carousel. You will be surprised at how much money you can make out of your own room.
Before selling them, ask yourself 3 questions.
- Have you used it for the last 3 months?
- Will you use it for the next 3 months?
- Does it have sentimental value?
If those answers are no, those items will not be missed. This is where I personally sell my own items. Check out my Carousell items to give yourself an idea.
Final Thoughts By Wealthdojo
Don’t start a resolution, start a revolution! If you haven’t been successful in your financial journey, just pick one of the above and commit to it for the next 3 months. I assure you that you will look back at 2021 and be proud of yourself.
Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.
Feel Free To Reach Out To Share Your Thoughts.
The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.