Your "New Decade" Resolution
A new year is upon us, which means many of us will be contemplating some new year’s resolutions. But this January 1 isn’t just the start of a new year; it’s also the start of a new decade. With that in mind, you could reframe your thinking entirely: instead of a new year’s resolution, you could make a “new decade resolution.”
A new decade resolution makes particular sense if you’ve been thinking about shoring up your long-term finances. Picture your life 10 years from now. You’ll be that much closer to retirement. If you have kids, they’ll be ten years closer to college – or perhaps they’ll already be in college. Or maybe you’ll be at an age where you want to be in your first house.
The point is, while ten years may seem like a long time, it will go faster than you think. What was your life like in 2010 compared to today? The time to start preparing for that “you plus ten years” era is now. And that’s why a “new decade” resolution may be the way to go. Think of it as a commitment to your future self.
It may seem a little overwhelming to think in terms of a decade-long plan, but it doesn’t have to be. The key is to break it down into small, manageable steps. The best first step: deciding what your goals are.
“A lot of people, when creating a long-term financial plan, don’t set goals for themselves,” says Steve Gambino, an investment advisor and assistant vice president at Commerce Bank. “That’s one of the first things I do with people when I start working with them. Make sure you have goals in place; otherwise, you’re just muddling through.”
When starting to think about goals, Gambino recommends thinking in terms of life goals, rather than dollar amounts. “I ask people to go through their needs, wants and wishes,” he says. He considers needs to include things like basic expenses and healthcare. Wants and wishes, on the other hand, may include things like travel, planning a wedding, or leaving a legacy for your children.
Regardless of what your needs, wants and wishes are, it’s important to be clear about them – and to write them down. “Write down your plan and your goals,” says Gambino. “That way, when life happens – if you need a new car or your furnace goes out – your goals always stay top of mind and you can come back to them.”
While putting down goals in writing may not seem to be important, research conducted at Dominican University in California has shown that doing so increases the likelihood you’ll achieve the goal you’ve written down. What really increases your ability to reach your goals, however, is getting specific about the actions you’ll take to achieve those goals and sharing updates with someone who will keep you accountable.
Fortunately, it’s easy to get help with that level of specificity around your goals and with the accountability: talk to a financial advisor. A good advisor will help you with those important aspects and guide you through the process of setting up a financial plan in the first place. Checking in with your advisor once a year also helps keep you accountable for sticking to your plan. These check-ins will provide an opportunity to discuss any new needs, wants and wishes and whether you need to make any adjustments to your plan to account for them.
“At any age, it’s important to meet with a financial advisor and develop a relationship with someone you trust,” says Gambino. “Everybody is different, and everybody has different goals. It can be hard to know where to start, and a financial professional can help you figure all of that out.”
For those who may be thinking about setting a “new decade resolution” and getting serious about a long-term financial plan, Gambino has some initial advice:
- First, establish a savings account for emergencies. Gambino recommends having six months of household income set aside. “You can dip into it as needed without taking your other financial goals off track,” he notes.
- Second, contribute to a 401(k) or IRA. The earlier you can start setting aside money into a tax-deferred account, the better, as this money will compound over time.
- Third, establish an investment account. “This will help with bigger spending items, like a vacation that you want to save up for,” says Gambino. “An investment account is a nest egg that can serve as a feather in your retirement income planning cap.”
Gambino adds that, even when thinking in terms of a long-term plan, it’s important to keep your goals attainable. “You don’t want to bite off more than you can chew,” he says. “Look at your budget and be realistic about what you can save each year.”
If you do this, he adds, the amount of progress you can make over the course of the next decade may surprise you. “A large amount can be gained in ten years,” Gambino says. “Create realistic goals, check in on your progress regularly and reevaluate as you go. There will be forks in the road, but if you keep coming back to your goals, you’ll reach them.”
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