New Year’s resolutions are those special little promises you make to be less like yourself and more like other, better people. Against the odds, we keep telling ourselves that we can lose 10 pounds, adopt a treadmill habit, and actually read Anna Karenina (to make up for that photo you posted on Instagram where you pretended to read Anna Karenina).
In theory, they are an invaluable opportunity to alter your habits and behaviors in ways that make you a more bearable person to be around. In reality, they are barometers for the extent of one’s willpower, or rather, more accurately, the extent of one’s failure. If I’m trying to be more optimistic (which is ironically one of my resolutions) they are a beacon of sorts, that despite all evidence to the contrary, the new year gives us arbitrary permission to do the extraordinary.
And by extraordinary, I mean things like drinking 8 glasses of water per day or going to the gym 7 days a week. (Last year I would’ve said that the word ‘extraordinary’ could be substituted for ‘unrealistic’, but I’m not going to say that, because I’m now more optimistic).
Maybe as the years go on I’m becoming softer or finding more inventive excuses to be lazy, but I think there’s something to be said about being happy you’ve made it this far. Maybe new year, same me. is kind of a beautiful thing. Or at the very least, we don’t need to rush to change everything about our personhood as soon as the clock strikes January 1st, 2023. (Unless you’re one of those people who posted themselves doing anything other than eating a pizza hungover on January 1st – then you should probably go about changing everything about your personhood – there goes my optimism again).
Last year’s words, as per usual when a year is quick, ring true:
Nevertheless, financial instability gives me chin pimples and forehead wrinkles and the very thought of organizing my financial life at least gives some illusion (however delusional) that I have a handle on something. So, here goes.
I call this next segment: Don’t change anything about yourself in the new year except your financial plan!
What You’ll Need
Whether you choose to work with a financial advisor or create your own plan, there are 3 things you’ll likely need to get your financial life in order:
- Copies of all documents that relate to your financial situation. This includes your rent, savings, debts, assets, taxes, insurance, and latte budget.
- A calculator.
- A spreadsheet to detail your current numbers.
I know I haven’t painted the most thrilling Monday night image but hear me out… Turn on sing-along music, crack a bottle of red wine, order Thai food, and lay out all your receipts and pages on your living room floor like you’re in the montage part of a rom com where the character gets their shit together and decides they don’t need no man – even though they will inevitably end up with said man. I don’t know. It helps me.
What You’ll Calculate
- What you own – This includes big items like your home, car, boat (a boat! I don’t know who I think is reading these articles but there’s no reason I should exclude the elite), savings, and investments.
You’ll find this information in bank and investment statements, retirement savings, and (depending on your age here) your will. - What you owe – This includes student loans, mortgage, car loan, boat loan (!), credit cards and other bills. Look for your mortgage records, loan papers and credit card bills
- What you earn – This includes your pay and other income. Look at your tax returns and pay stubs.
- What you spend – This includes basics like food, clothing, utilities, car costs, and your latte budget, as well as extra expenses like dining out, insurance, health or dental bills, and money you donate. Look at your bills, receipts, and credit card statements.
Once again, I am going to abuse my cousin’s neuroticism and share her perfectly color coordinated budgeting plan. If you fill this out at the end of every month, I promise it will give you a superiority complex.
COMPOUND INTEREST IS SEXY!
If I can get behind any resolution in 2023 it can be that of compounding your money.
I’ve said it before, and I’ll say it again – financially literate people invest (and are sexy).
Here’s why:
The average stock market return is about 10% per year for nearly the last century, as measured by the S&P 500 index. In some years, the market returns more than that, and in other years it returns less.
The stock market is geared toward long-term investments — (i.e., money you don’t need for at least five years). For shorter time frames, you’ll want to stick to lower-risk options — like an online savings account — but expect to earn a lower return in exchange for that safety.
For the visual learners out there, I’ve input some numbers into a compound interest calculator…
- Initial Investment: $7,000
- Regular Addition: $25 monthly (feels reasonable? Two less lattes per month)
- Interest Rate: 10%
- Interest is Compounded: Monthly
- Years to Grow: 5 years
The computer spit this back out at me:
Your initial investment of $7,000.00 plus your monthly investment of $25.00 at an annualized interest rate of 10% will be worth $13,453.09 after 5 years when compounded monthly.
In other words, the total interest earned would be $4,953.09
In more words, that averages to about $1,000 a year for doing absolutely nothing.
Whatever happens, remind yourself that you’re human and that, in the end, resolutions are nothing more than little coin wishes tossed into a fountain, and that sometimes you need to roll up your pant legs, walk into that fountain and borrow those wishes back so you can buy yourself a bottle of bottom shelf tequila.
To a year of being softer, kinder, and financially literate.
Until the next.
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