Year-end look back – start next year on the right foot.

Dec 31 / Jay Zigmont, PhD, CFP®

At the end of each year, we need to look back and forward.  We need to look back to understand what worked and what didn’t, while we need to look forward to understand what we can do differently for next year.  The goal isn’t to beat ourselves up for the past year but to understand the progress we made (or didn’t) to know what to change.

Start with three questions: 

  • What worked? What did you do last year that made your life better?  Did you pay down debt?  Increase your net worth?  Lose weight?  Get a raise?  Find the right someone?  It can be anything.  Start with the positives and give yourself credit for what you did accomplish. 
  • What could have been better? There are always things we could have done better.  The challenge is to acknowledge the facts but not beat yourself up about them.  I did lose weight last year (which is excellent!).  If I focus on not meeting my weight loss goal (I didn’t lose as much as I wanted), I might be discouraged. 
  • If you could change anything, what would you change? Imagine you have a magic wand.  What would you change?  Why? 

If you have a small business (or side-gig), look at the business with the same three questions.  If you have a partner or spouse, share your answers.  You may find that you are much more critical about yourself than your spouse is.  Your magic wand answers give you an idea of goals for the following year.  Dream big.

On the financial side, there are a few steps I do at year-end:

  • I go through each of my accounts and look for discretionary spending that might be over budget. For me, that’s Amazon and dining out.  Adding up what you spent over a year might give you areas to focus on for next year and the motivation to make a real change.  Another tool is to figure out how many hours you had to work for that spending.  Don’t be surprised when you are working many hours just to eat out (or get deliveries/DoorDash).
  • I document my net worth. Your net worth reflects everything you own minus everything you owe.  If you have made progress paying down your debt or savings and investing, your net worth will go up.  I’m always looking to make sure I make progress.  Some of this is out of my control (the markets are what the markets are), but I still get a picture of where I am.  The bonus of looking at your net worth annually is that it evens out some of the peaks and valleys across the year.
  • I check to make sure I’m still on pace with my financial plan. Your financial plan should not be a static document.  Take the time once a year to make sure you are on plan (or close) and see if any changes need to be made.  Sometimes it can be daunting to look decades out, but the decisions you make now change your future.

With all that information in hand, it is time to set SMART goals for next year.  SMART stands for Specific, Measurable, Achievable, Realistic, and Time-related.  For example, I want to lose 50 pounds over the next year.  That is simply losing 1 pound per week (close enough).  It fits the SMART guidelines.  It is a challenge, but goals should be a challenge. 

Once the goal is set, you need to make a plan to achieve it.  For a weight loss goal, the amount (and type) of food you eat and how much you exercise are the ‘leading’ indicators that determine your success.  The scale is a lagging indicator.  Focus on measuring the leading indicators, and the goal will fall into place. 

If your goal is to save $6000 next year, the leading indicators will be keeping to your budget and putting $500 into savings each month.  If you slip one month and only save $300, don’t beat yourself up.  You can either make it up in the next month or save more each month in the future.  Some months will be good (and you’ll save more), and others you might miss the mark.  You did not fail; you are just human.  You only fail when you stop working on your goal altogether. 

Where do you want to be next year at this time?  Your future is in your hands.  If you would like help, schedule a meeting with a Childfree Wealth Specialist® here.

Jay Zigmont, PhD, MBA, CFP® is the Founder of Childfree Wealth, a life and financial planning firm dedicated to helping Childfree and Permanently Childless people. Dr. Jay is a CERTIFIED FINANCIAL PLANNER™, Childfree Wealth Specialist, and author of the book “Portraits of Childfree Wealth.” Dr. Jay is the co-host of Childfree Wealth Podcast. His Ph.D. is in Adult Learning from the University of Connecticut.

He has been featured in Fortune, Forbes, MarketWatch, Wall Street Journal, New York Times, Business Insider, CNBC, and many other publications.