OK, it has probably been long enough since New Year's Day that most of our resolutions are toast. So now that the year is well under way and we are back to the day-to-day challenges of making ends meet, how about a few simple but powerful resolutions to start on now that can pay serious dividends in future years?
Christopher Hopkins* Set some goals. Choose one or two specific objectives that you would like to accomplish in 2017, and write them down. Then outline the steps required to begin making progress toward your goals and get started. Perhaps you are ready to pay down some credit cards, step up your gifts to charity, set up a college savings fund, or look at some hypothetical retirement scenarios (it's even OK to fantasize about losing weight). Let your mind wander and jot down two or three of the things you really want to accomplish someday. Then identify a couple of short-term goals to achieve this year in pursuit of those longer-term objectives, record them, and create a plan to get them done.
* Pay down some debt. Even a small reduction in indebtedness repeated year over year can produce dramatic results. For the U.S. in general, the next 10 years will be all about reducing the average debt burden on American families, and the laggards in this deleveraging trend will experience substantially lower standards of living in retirement and higher levels of stress and anxiety. Identify at least one credit account, paint a red circle on its back, and blast away until it is obliterated. Set an achievable goal, and then focus relentlessly on it until it is completed. This is one of the most important things you can do to improve your quality of life in retirement.
If you are already debt-free except for your mortgage, consider making additional principal payments to speed up the process of amortizing your home loan. Even relatively small additional payments make a big difference, since they are typically applied directly to reducing principal. Not only will you pay less in interest, but you will hasten the day on which you own the house free and clear.
* Create a budget. (Ugh!) A few peculiarly well-organized and results-oriented people are already way ahead on this one. But for the rest of us, the process of budgeting can be drudgery. It need not be. Don't focus on too much detail, especially at first. Avoid the temptation to subdivide income and expenses into too many minute classifications. Just get started on the broad themes that will help you control your destiny.
Compile an estimate of next year's likely expenses, allocated to a few major categories. Include an entry for discretionary expenditures like entertainment and travel, then match your expenses to your projected income. If your plan does not include a specified goal for savings, review the expenditures and rework as necessary to make room for stashing a little each month. If sacrifice is indicated, embrace it. Re-learning the joy of delayed gratification can be an intoxicating experience once the results begin to multiply. Embracing the ethos of immediate gratification is a sure-fire path to retirement stress.
* Expect Success. Be sure that the steps you have outlined are achievable, and then get to work. Attaining even small incremental goals reinforces your resolve to keep moving ahead and catalyzes the next round. Success begets success, so start small and build upon your previous achievements.
Here's to a more prosperous and less indebted New Year.
Christopher A. Hopkins, CFA, is a vice president and portfolio manager for Barnett and Co. in Chattanooga.