Resolutions have a bad rap, in my humble opinion.
I set them every year, but I don’t call them that, per se. I just look like a business plan for my whole entire life, one I reboot every year, just like you would a business plan. This gives me a framework around which to think, plan and act on my dreams and goals in every area of my life.
My success rate is good — I hit something like 75 percent of the targets I set every year, and many of the targets I don’t hit are goals I reset or change as the year unfolds.
Given that a recent study found about 88 percent of resolution setters fail, I speak as an armchair authority when I say that I have resolution setting down to a science.
But it’s fair to say that whether you achieve what you want to in the coming year will be driven largely by how you are thinking about your goal, resolution or dream, and how systematic and thorough you are in setting yourself up for success.
What I’ve observed is that most people who set resolutions and fail to achieve them wait until they are back at work post-holidays to get started. With no plan in place, it’s almost inevitable that you’ll get derailed when you try to do the hard work of making behavior or habit changes in the midst of all the urgent to-do’s and everyday emergencies.
I’ve also found that resolution setters are their own worst enemies. They tend to think negatively, sometimes even talking themselves out of trying because they are overwhelmed at the thought.
Nowhere is this more common than in the area of personal finance, including resolutions made around real estate and mortgage issues. Most people will at least start on a new diet or workout plan in earnest, but many will never even pick up the phone to call the financial planner or make even one serious change to their spending or investing plans.
Or it takes them years to see that they have more control over their real estate fortunes than they think — that they can take steps to overcome the recession-related hits they’ve taken to their home’s value, their credit scores or their investment portfolios.
Here’s a three-step process that will help you realize your real estate and financial goals for 2013:
1. Rethink. So many of us have been living in a post-recession ennui for the last couple of years, frustrated and upset that our own homes, our own mortgages, our own savings accounts do not reflect the "recession-is-over" ebullience we see in the headlines.
Whatever happens with the fiscal cliff situation, it’s time to declare yourself done with financial troubles. So much of what happens with your finances starts in your mindset. So, if your finances weigh heavily on your mind, sit down and rethink everything. Reflect over the last five or 10 years and what has taken place in your finances, including bankruptcies, layoffs, credit card debt, foreclosures, short sales, your career — the whole picture.
And think about how your own behavior factored into the areas where you’re not happy with what you see. Be honest with yourself. Do you overspend? Could you live in a smaller home if it meant saving more and gaining a more secure financial future? Could you be more aggressive about building your career and earning more? What did and didn’t work?
Then, do what Dr. Henry Cloud calls "metabolizing" your past financial challenges, traumas and failings: Think through and retain the lessons, then simply and decisively let go of any and all emotional upset about what has happened in your financial past that will not get you closer to your vision.
If you are angry with the bank that foreclosed on your home in 2008, let it go; that anger will not help you avoid another foreclosure in the future. What will? A clear financial plan, personal financial discipline, a more conservative approach, saving a bigger cushion before you buy again so that temporary interruptions to your income are less likely to derail your whole life. Keep what is helpful and jettison what doesn’t.
Then, think through what it is that you really want now and how that has been impacted by your recent financial past. Maybe pre-recession, having a huge, suburban house and a swank car for your long commute was important, but now you’re more interested in a sustainable mortgage on a comfortable home with a super-short commute. Once you let go of the emotional baggage from whatever happened over the last few years, you’re in a better position to cultivate a clear, exciting and mature vision for your future (minus the knee-jerk reaction to the past).
Now you are equipped to set some firm goals and targets for 2013 and beyond: specific numbers and timelines for what you want to see happen in your life with respect to your home, your retirement, your savings, your career, and even your family growth, hobbies and recreational experiences — like travel — which intersect with your finances.
2. Recover. Once you’re armed with your lessons, vision and goal and you’ve lightened your load in terms of the emotional baggage you might have been carrying, it’s time to set about in earnest with a plan for how to heal what was broken in the recession. Get yourself and your family finances out of emergency mode. So many folks have developed a go-to script to describe their post-recession financial state that goes something like this:
- "Oh, I can’t buy a car, my credit’s a mess!"
- "I’d love to go to Paris, but there’s no way — my cards are maxed out."
- "I hate my job, but I’m so broke, I can never quit."
Decide and declare — right now — that 2013 will be your year of recovery, no matter what Congress does or doesn’t do. Take a financial temperature check and figure out what your specific recovery projects for the year will be:
- Do you need to work on your credit, paying off open collection accounts or settling bills?
- Do you need to reduce your debt?
- Do you need to make up or catch up on what was depleted in your emergency, retirement or other savings funds?
- Do you need to get your mortgage caught up or back in the black?
If you need to retrain really dysfunctional spending habits, there are many books and websites that can help, like "Financial Recovery" and Conscious Bookkeeping. Many cities also have low- and no-cost resources that can help, like Spenders Anonymous and nonprofit credit counseling organizations.
Also, I want to give you permission to get aggressive and be creative to achieve your financial mission. If you need to bolster your savings or correct your mortgage situation, you may need to start a side business, sell your stuff or even sell your house, if the reality is that you’re overextended.
With home values higher than they’ve been in quite a while, you might have a great opportunity to move down to a home or mortgage you can afford with financial integrity (e.g., not living paycheck to paycheck, saving for investments, not buying necessities on credit, etc.), if you have been upside down for the last few years.
3. Reposition. As you do the sometimes hard work of meeting your healing and recovery targets, inject some excitement in your financial life by also setting targets about where you want to be in the future, and what you want to do with the prosperity you can start building now. And take steps, even if they’re baby steps, in that direction.
Start feathering your nest, even if you can save only $50 or $100 per month. Get real about the future, put a financial plan and a spending plan in place, and use it to power your current and future prosperity. Start that business you’ve always wanted. Get those new job skills you’ve been wanting to have; try the open education offerings from MIT, Coursera, Skillshare and other low- and no-cost online educational options.
And don’t let your own behavior be against your vision: Pay every bill on time, every time. Don’t pull cash out of your house just because increasing property values will allow you to.