In 2016, Be Resolute
Socrates boldly proclaimed, “The unexamined life is not worth living.” This explains to me why we seem to have an innate and universal desire to make New Year’s resolutions and take steps to reach our full potential.
It’s amazing what you can find on the Internet these days. About half of Americans make New Year’s resolutions. I was happy to see that the third-most-common goal, behind losing weight and getting organized, is spending less and saving more.
The most-popular financial resolutions listed were “save more,” “pay off debt” and “spend less.” More than half of those who made financial resolutions for 2015 say that they feel financially better off today, while only about a third of those who didn’t make financial resolutions say the same.
Overall, 2015 was not a good year for investment returns. Interest rates were near zero and stock market returns were generally negative. Many savers understandably become discouraged when their accounts go down in value. Savvy savers and investors have learned that continuing to invest after periods of market decline (like 2015 and 2008) is the wisest strategy.
I often tell savers with more than 10 years to retirement to cheer for a lower stock market because this results in the ability to buy more shares. Your first resolution for 2016 should be to keep saving and do not get discouraged by temporary market declines. You are invested for the long term.
Take the advice of Socrates and examine your financial life. Good financial planning starts with an awareness of your situation and goals. By setting savings goals you’ll make it easier to get there.
Do you want to pay off the mortgage in five years, or save enough to put the children through college or buy a house at the beach? Do you want to retire in the next 10 years? Figure out how much you need to accumulate and then set a savings goal. Do the math to see what you need to save on a monthly, quarterly or annual basis to reach your goal. Then set up a plan so that the money goes directly into your investment account before you have the chance to spend it.
After you set your goal, you should make a plan to fund it. Start by analyzing your cash flow. Sit down before every month starts and project your income and expenses for the month. Transfer the difference to your savings or investment account and do not spend more than your projection. At the end of the month, compare your actual spending to the projection. Repeat this every month and before long you will be saving enough to meet your goal.
We know that the odds of keeping a financial New Year’s resolution are pretty good, and seeing progress towards a goal is highly motivating. Remember that wise investors keep saving when markets decline. Resolve to examine your financial life to increase your odds of success.
This column was featured in the November 1 Knoxville News-Sentinel. You can read it here: In 2016, You Should Be Resolute
Meet the Author
Tom Coulter, CPA
Tom is the President and a founder of Meridian Trust. Tom graduated from The University of Tennessee, Knoxville, in accounting with honors, in 1978. Tom previously worked for the international accounting firm, Deloitte. He later joined the financial medical advising firm, FIS Associates, before founding Meridian Trust in 1997. Tom has worked extensively in retirement planning, taxation, estate and financial planning and investment management. He is a Certified Public Accountant, a member of the American Institute of CPAs (AICPA), and the Tennessee Society of CPAs (TSCPA).
Tom is also credentialed as a Personal Financial Specialist (PFS) by the AICPA.