People have been making New Year’s resolutions for at least 4,000 years, beginning with the Babylonians, who supposedly made promises to the gods. The idea of transforming our lives for the better, from one year to the next, is powerful. When we sit back and reflect over the years, we hope to make adjustments in our habits to be healthier, to save more money, to pay down irksome high-interest debts, or whatever the case might be. For many, this might seem like climbing Mount Everest in a blizzard, but as Walt Disney once quipped, “The past can hurt. But the way I see it, you can either run from it or learn from it.”
The past plays a more significant role in your financial decision-making than you may realize. Here are a few factors to consider:
1. Recognizing past mistakes and not repeating them
Spending habits, acquiring bad debt, risky investments, and not saving enough are some of the financial mistakes that are easy to make but can harm you down the road. Generally, in life, there are consequences for your actions, and making poor financial decisions are no different. Poor financial decisions can follow you for years, and if the same mistakes are made repeatedly, they can burden you for a lifetime. Start a journal for the new year to write down your resolutions so you can see how your positive actions benefit you over time.
2. Cultural and peer influence
For many people, their financial behaviors are influenced by the culture they grew up in. There is a saying that goes, “Tell me who your friends are, and I will tell you who you are.” The idea, for example, is if you were around big spenders earlier in life, you could fall into that pattern to want to keep up or fit in, and it might happen without you realizing it. The beginning of a new year is a good time to take a step back and make financial adjustments to your life.
3. Financial experiences from your upbringing and family
Our upbringing and the financial situation we lived in could play an integral role in our financial behaviors as an adult. Children can be impressionable, and watching how parents save or spend money and how they deal with economic issues could influence how children manage their own finances without even realizing it.
When you grow up a certain way, and that is all you know, it could be difficult initially to notice anything is wrong. The trick for people is to recognize that they are not managing their finances properly, pinpoint what mistakes family members were making, and learn from them to create new habits. It is not easy to change lifelong habits, but it isn’t impossible. Make a New Year’s resolution to help put the past behind you.
4. Revisit your risk-tolerance
Taking inventory of your past experiences and analyzing them can give you a snapshot of where you stand financially, and how you got there. It may also may provide a direction for you to take to potentially avoid making past mistakes again. You might want to revisit your risk tolerance and ways to modify strategies that have been beneficial to help align with the changing times.
5. Be willing to change
The willingness to change and revise your financial behaviors and strategies is critical, as your personal circumstances can change in the blink of an eye. The financial climate can be favorable one day, damaging the next, and your long-term goals may veer away from what they once were.
6. Get help from a financial professional
Taking self-evaluation of our behaviors, both past and current, can be difficult. Consider getting an outside perspective from a financial professional to help you conduct a comprehensive review of your financial situation, your past strategies and plans, and ways to modify them to help you as you pursue your long-term financial goals. Look at the past and be willing to learn from it. Make these New Year’s resolutions a true new beginning, one day at a time.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by LPL Marketing Solutions
LPL Tracking # 499437