Five keys to seal 2018 financial resolutions
Year after year, century after century, the 80/20 rule (known as the Pareto Principle) has been bandied about in some form or other.
It theorises that for many events around 80 per cent of effects come from 20 per cent of causes. In economics this translates to 80 per cent of wealth generally being in the hands of around 20 per cent of the population.
It has also been applied to science, maths and even exercise.
When it comes to New Year’s resolutions only around 20 per cent of people making New Year resolutions will stick to them in some form. Findings also indicate those who make resolutions, and write them down, are 10 times more likely to attain their goals than people who don’t.
Strength of purpose, or lack of it, could be one of the monumental human failures, possibly entwined in the ‘she’ll be right’ attitude. Certainly, while the metaphoric sun shines everything feels good, but what happens when storms come? Do you have a plan?
1. Real personal change comes from within. Three psychologists in the book Changing for Good, observed with smokers, that it is the internal thought processes preventing (or enabling) permanent, life enhancing change. Despite tendencies to settle for the ‘status-quo,’ researchers find we all have it within us to modify behaviour. Mindset is the key to achieving our financial goals.
2. Seek support. No man is an island! We are all interdependent in some way. You might know the sort of income (in todays terms) you want to live on in retirement, but do you know what you need to do to get there? Are you really aware of the types of insurance you need to protect you, your loved ones and your assets? What are the easiest ways to ditch the mortgage – or even to get one?
One problem, I perceive these days, is people are product weary, or wary. Big institutions are out there flogging their particular product and you naturally have ‘product resistance,’ muttering internally, ‘is it good for them or me?’
There are many unbiased financial, investment, insurance and mortgage advisers who will be able to fit products to your needs. These advisers will in many cases also help keep you on the right financial track in line with your values and goals. Find one that has a similar philosophy to you. In fact, don’t hesitate to interview a potential adviser to ensure they will walk the talk, for you.
3. Incentivise goals achieved and set consequences for backsliding. We respond to carrots and sticks. You take out a contract (in writing) with yourself.
These basic components are needed:
The goal – small steps get the big goal accomplished.
The stakes – set consequence of something to lose.
The referee – someone you trust but aren’t close to. Could be your budget adviser or financial coach.
4. No pity parties allowed. Wallowing in self-blame will only serve to reinforce failure as acceptable. Pick yourself up, dust off failure (everyone fails at some time), learn, then get back on track. Only you can make things happen for you.
Steve Siebold, in How Rich People Think, estimates 40 to 60 per cent of successful entrepreneurs and executives fail multiple times. Positive response to setbacks requires setting aside the emotional negatives or plotting a logical forward pathway.
5. All or nothing change can be a recipe for failure. We are all familiar with the ‘crash diet’ syndrome, where it is just too hard and too all out. The Swiss Cheese Theory of Life, by Judith Belmont, describes New Year resolutions as ‘as setup for failure’ because they embrace an all-or-nothing attitude toward change. Persistence and patience are more important than perfectionism, she cautions.
Focus on your values and the goals needed to maximise those values. I work with other people, helping them to put a decently coordinated financial strategy in place, but just as I teach, I constantly need to remind myself what is it I am chasing and why. After all being human is being faulty.
You are the key. You make the decisions. Your mind-set will determine success. Let’s not contemplate complete failure.
Disclosure: Care has been taken to ensure that any information is accurate. No liability is accepted for its use. Enquiries are welcome.
Experienced in lending, risk advice and planning, Allistar Walker is a Registered Financial Adviser, Senior Fellow of Financial Services Institute of Australasia and director of IFL Associates Limited.
His full disclosure is available free at www.mortgagehelp.co.nz or he can be contacted at 09 410
6023 or enquiry@mortgagehelp.co.nz.
Blog site www.alsoup.blogspot.co.nz