New Year, new norm, new goals and new hope

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“The beginning is the most important part of the work” — Plato

The Babylonians were the first civilisation to leave records of new-year festivities, some 4,000 years ago. A 12-day festival to celebrate the renewal of life, known as Akitu, marked the beginning of the Agrarian year.

The first time the word “New Year Resolution” appeared was in a Boston newspaper in 1813. Although New Year was started as a celebration in the earlier stage of the civilisation, today, we not only celebrate New Year, but we look for better future, progress, health and wealth alongside it. New Year inspires us to set a goal, to plan, make a commitment and achieve all our life aspirations.

The beginning of a new year is always a great opportunity to think about any changes we might wish to make in our personal finances. Something about a fresh start is very motivating.

This could involve reducing debts, setting a budget, starting to save, starting an investment and others. If you’ve not set your financial goals, here are some behavioural finance-backed, financial goal setting tips and tricks to help you:

Set experience goals

Research shows we are much happier buying experiences than buying more material possessions, and money spent on experiences is seen as money being better spent. Our natural tendency to be risk averse may also lead us to be more reluctant to buy experiences, such as attending a stock investment class, hiking, travelling, starting an MBA course and others.

This is because the quality is difficult to verify in advance compared to material possessions, which can be more easily refunded. Experience goals leads to financial well-being instead of financial success only.

Personal finance reflection

The end of the year marks a threshold and invites a pause for reflection. It’s a great time to take a view of the year behind and look ahead. Each year, this will be a good time to evaluate what we have done during this past year.

We always say “forward looking” is the key to success but in order to create the future, we must first look back and identify our strengths and weaknesses. Some questions to ask to reflect on what went well on my finance would be; How did my assets perform?

What was the best financial decision? What is not working? Let’s walk purposefully, with clear financial goals into the New Year, guided by thoughtful insights from the past.

Power of goal sharing

A supportive environment means removing barriers and making it as easy as possible for yourself to perform your financial behaviour. Sharing your financial goals in life with others is an important success principle.

You gain more clarity about your financial goals and how to achieve it. In speaking your goals out loud, conversations with others may help you clarify and sharpen your goals. Sharing your goals with a friend or family member makes the goal more real and no longer just a note in your diary.

No pain, no gain

Most resolutions made do not make it past January. The ones that make it into February are usually forgotten by March. Why? Lack of commitment. It is easy to be motivated. Maintaining motivation requires commitment. Without it, your initial motivation and energy to get your resolution going will dwindle very quickly.

If you do have credit card debt, don’t be lulled into a sense of complacency by the minimum repayment on your credit card balance, start sacrificing on your other expenses and pay off your credit card.

Develop a financial plan

A financial plan acts as a guide for your financial journey. Imagine yourself trapped in a maze filled with twists and turns, blind alleys, and dead ends. Wouldn’t exiting it be simpler if you had a map and compass to guide you? Your financial life can be a maze, and a personal financial plan is the map and compass that can help guide you through that maze.

Financial plan helps individuals and families reach goals that require money to achieve, such as having adequate retirement income, children education fund, tax planning, insurance protection, wealth distribution and others. With good planning, most people find they can achieve their desired standard of living and meet their financial goals in a timely manner.

Engage a financial planner or advisor

A good financial planner is one who has the expertise to help you meet your financial goals. It’s difficult to be unemotional about your own money. That’s the real purpose of having a financial planner or advisor.

You don’t hire a financial planner or advisor because you’re not smart enough to do this yourself, you hire one because they’re not you. When looking for a financial planner or advisor, choose one who is gives you advice for your security, not one whose intend is to only sell you something.

It’s very crucial to engage someone who prioritises your interest first.

Personal finance is very much personal than finance, it takes time and effort. It doesn’t happen overnight. You don’t have to understand everything about personal finance at once.

No matter what your past financial life looks like, recovery is possible. When it comes to personal finance, my simple philosophy on feeling a sense of power or control over your situation is crucial.

A good way to start is to stop beating yourself up over your past money mistakes and move forward. Lastly, I wish you all a great year ahead and a Happy New Year.

 

Gunaseelan Kannan, CFP, a Financial Adviser Representative by Bank Negara Malaysia and a Licensed Financial Planner by Securities Commission (CMSRL/B4198/2013), is currently pursuing his PhD research on financial planning and financial technology. He also lectures on accounting, finance and business fields in Asia Pacific University of Technology and Innovation (APU). He is the winner of Malaysian Financial Planner of the Year 2020, from Financial Planning Association of Malaysia.

Email any queries to [email protected].