Financial Fitness: Your New Year’s Resolution

For many people, the new year represents a fresh start. The author provides some suggestions on how to develop long lasting financial goals to put you on a path towards a comfortable retirement.

To many, the changing of the calendar year represents a fresh start, a new beginning, a clean slate, and an opportunity to make a change for the better. Our resolutions often sound cliché in nature but usually follow the general theme of self-improvement. We all want to live better.

In the short term, we all have different goals – make more, weigh less, quit smoking and so on – because we are all unique. But there are also goals that nearly every single Federal Employee has in common – retire comfortably, maximize FERS/CSRS benefits, alleviate financial stress.

So this year, in this time of renewed commitment, commit to reviewing your Financial Fitness – either with the help of a Federally Focused Financial Advisor or using some of the budgeting tips and resources provided in this article.

Frame your resolutions properly

Statistics say that, of the people that go as far as to verbalize a New Year’s Resolution, 95% have already broken it at this point. The issue is often that our new year’s resolutions focus on depriving ourselves of something we want – fewer sugary treats, fewer shopping trips, fewer cigars – and is usually met with about as much enthusiasm as childhood chores!

If you frame your resolution as depriving yourself of something that you want, then continuously denying yourself will forever be a test of your will power. These resolutions fail because it is essentially a questions of how long can you deny yourself.

Juxtapose that approach with those that phrase their resolutions to focus on the positive result; they establish compelling justifications and motives for their actions with the end goal in mind, and are able to sustain lasting progress.

Visualize specific rewards for achieving your goals that allow you to keep your financial decisions in perspective.

The marathon runner that pictures the thrilling feeling of setting a personal record when crossing the finish line is going to be pulled by that image to run harder than someone entering the marathon because they said they wanted to get in shape while feeling guilty on New Years Eve.

Similarly, a dieter that diets because they want to live longer and see their grandkids graduate has more motivation than the dieter that decided to eliminate dessert in order to lose the weight they put on over the holidays. Although both are dieting, the first is resolutely working towards an immensely powerful personal goal whereas the second is testing how long they can maintain their will power to continue depriving themselves of sugary treats.

This “reluctance to deprive our immediate-selves” is an ironic inconsistency in retirement psychology that planners face with alarming regularity when helping Feds prepare for retirement. Saving money for your retirement should not feel like a deprivation to your immediate-self but a reward for your future-self! You should never resent paying you!

Make it personal

The first step to addressing this mental monetary misconception is to make it personal. Look at your own unique situation. Run a Retirement Income Forecast for your current retirement path (you can use EBIS if you’re military, OPM’s suite of calculatorsSocial Security Calculators, or request a free personalized analysis incorporating all of these components from the experts at WalkerCPG) to see what your future looks like without any budgeting tweaks.

Establish what percentage of your working “Hi-3” your current retirement plan will provide to determine the “short-fall” or “surplus” of income that you can expect in retirement compared to today.

Develop a budget

The next step is to build a budget. Now, I know that is not a sexy or jaw-dropping proposal, but the goal of this budget is not to shame you out of your current spending habits. This budget is to allow you to establish the true value (not the cost) of your regular expenditures and evaluate which components are key and which funds could be redirected towards achieving your financial fitness.

Begin with the end in mind

With a budget and a Retirement Income Forecast, you can start putting your financial decisions in better context, such as asking whether paying an extra $100/month for 2,000 TV channels is worth more than retiring 6 months earlier?

Normally, in a financial decision making scenario, people ask themselves questions such as, “Can I afford this now?” and answer with only their current funds (or credit card space) in mind.

The key to lasting financial fitness is to evaluate your financial decisions not in terms of whether you can afford the cost of something today but whether you can afford to deprive your future-self of achieving your goal. Very rarely is the question phrased with the end game in mind, “Would I rather afford this today or afford an annual vacation to see the kids each summer in retirement?” When phrased this way, choosing the latter is progress towards a meaningful personal goal rather than simply a denial of something you want and have enough money to purchase.

Use budgeting tools for help

For those of you with a clear financial resolution in mind, use the following budgeting tools to evaluate which funds can be redirected in order to help achieve your goal. For those of you that are still searching for a financial resolution, establish a budget as a means of determining which objectives need to be addressed first (such as credit card debt)! Consider utilizing budgeting apps (such as Mint or MoneyCarta) or online budget calculators, such as Schwab’s budget planner. Budgeting is not the laborious chore it was a decade ago; these tools make it quick and easy!

Like the marathon runner with the finish line firmly visualized in their head, when you propose your financial decisions with retirement goals in mind it will help you establish a lasting pattern of financial fitness. By addressing the underlying issue that keeps many of us from achieving financial fitness (and our other resolutions) and providing some great resources to assist you, this article should empower you to make positive changes this year that last!

Understanding the true value of establishing financial fitness is bigger than any one resolution or budgeting tip that you will ever get. And the old saying you hear tossed around the gym applies here too: it is much easier to STAY in shape than it is to get in shape, so use these tools and techniques to frame your decisions and maintain your financial fitness for decades to come!

About the Author

Tom Walker is the founder of Walker Capital Preservation Group, Inc. He believes strongly in empowering today’s federal employees through benefits education at retirement workshops and through featured publications. He has compiled many greatly informative resources on his website, and WalkerCPG Facebook page.