Why You Shouldn’t Make Financial Resolutions (And What to Do Instead)

The end of the year is important for your finances—you may need to rebalance your portfolio, decide on charitable contributions, harvest tax losses, and more. These activities may show some weak areas in your saving or investing strategy, which may lead you to want to set financial resolutions to kick any bad habits. Here’s why we don’t recommend financial resolutions and what you should do instead.

Short-Term Resolutions Don't Last 

Short-term goals tend to be either unrealistic or vague—they lack purpose or drive behind them. “I want to lose weight,” or “I want to save more money.” Resolutions like these are unclear and don't last because they don't have a deep-rooted meaning to you. Take the ‘save more money’ resolution, for example. For this resolution to be successful, you have to ask yourself: Why do you want to save money? 

  • Do you want to be able to contribute more to your retirement accounts? 

  • Are you overspending on things like entertainment or dining out? 

  • Has a major life event happened—such as getting married or buying a house—that’s caused you to shift your goals?

Change takes a lot of work and planning. Short-term resolutions typically aren’t well thought out, so you don’t have concrete steps to check off your list. Without detailed planning and meaning, resolutions are doomed for failure from the start.

Set goals that align with your values instead 

You can’t set realistic goals without values. Values are our beacon and remind you about the why behind your goals. Goals that align with your personal values mean much more to you, so you're more likely to achieve them. As you navigate your year-end finances and decide on actionable goals for the new year, consider what is most important to you such as:

  • Your long-term health

  • Living near family or starting a family of your own

  • Retiring at a certain age

  • Starting your own business

  • Donating your time or money to charity

The list could go on and on. The important thing is to understand your values so you can make goals that align with those things. Actionable, value-driven statements may look like: "I want to learn how to cook so I can eat healthier meals at home to help my blood sugar levels,” “I want to host a family dinner once a week so all of the grandkids can get together.”, or “I want to create a budget that balances life and finances. I want to enjoy things like eating out or concerts, but I also want to pay down my high-interest debt over the next 8 months.” These statements are specific, attainable, and time-bound, but most importantly, they are value-driven.

Define Your Short-Term Goals 

The end of the year is a great time to determine and map out your short-term goals. Here are a few short-term goals to consider:

  1. Maximize your workplace benefits. Many people don’t take full advantage of their employee benefits. For 2023, you may want to max out your retirement contributions, check to see if you have enough life insurance, and/or make sure you're getting the most out of your health insurance plan (like contributing to an HSA if you have one). 

  2. Negotiate equity compensation. Equity allows you to participate directly in company growth. Even a small piece of equity can be significant. Before negotiating equity compensation, you must clearly understand the company’s long-term growth potential.

  3. Arrange for deferred compensation. A deferred compensation plan allows a portion of an employee’s salary to be paid at a later date. This is especially helpful for high-income users as it helps reduce their taxable income.

  4. Strengthen your investments. It’s essential to build a strong investment pool that can keep up with inflation. Series I-Bonds are a strategic hedge against inflation and can be a great option for individuals who like to be conservative with their investments, but also want to see success during times of inflation.

Consider Your Long-Term Goals 

Your long-term financial goals take 5+ years to accomplish and are tied to major life events like retirement or higher education. Retirement takes a significant amount of planning to be successful, and finances aren’t the only thing you need to worry about. Think about your retirement lifestyle plan. Do you know how you’ll spend your days? What would your purpose be without a job taking up 50+ hours of your week? Retirees need to identify their personal mission that drives what they do during retirement. Just like how a company has a mission statement! Then, there is the financial side of retirement to account for, which relies heavily on when you want to retire and what you want your lifestyle to look like in retirement. You’ll need a clear picture of what your recurring costs will look like and any “big ticket” items, such as vacations, to create an accurate spending plan. The end of the year is the time to identify gaps in your savings and investments and work to fill them. You may need to maximize your retirement contributions or diversify your investment portfolio to achieve your long-term goals. Your financial milestones will shift as you age, and our team can help you create a financial plan that fits your current stage in life. Start the new year on the right foot and contact our team today.

This commentary reflects the personal opinions, viewpoints, and analyses of The Dala Group, LLC employees providing such comments. It should not be regarded as a description of advisory services provided by The Dala Group, LLC or performance returns of any The Dala Group, LLC client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data, or any recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The Dala Group, LLC manages its clients’ accounts using various investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

Mike Heatwole

Mike Heatwole is a Certified Financial Planner™. He is the founder and CEO of The Dala Group. Mike graduated from the Illinois Institute of Technology with a bachelor’s degree in civil engineering and a master’s in Structural Engineering. His interest in financial planning began as a table leader for Dave Ramsey’s Financial Peace University, and shortly after, he changed careers to became a financial planner. He organically built The Dala Group, a wealth management firm, focusing on helping families achieve their lifestyle and legacy goals.

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