295 | A Fresh Start for Your Finances

As we settle into the new year, don’t bring old money habits with you.

Start the year with a fresh start for your finances so you can make real progress this year.

In this episode, let’s reflect on last year’s efforts, set achievable goals for this year, and create a solid plan to achieve those goals by getting your cash flow in order.

• • how to create a fresh start with your finances
  • evaluating your goals and efforts from the previous year
  • setting new, achievable goals
  • creating a spending plan to maximize cash flow

• Need help with your finances? Schedule a consultation here

You’re listening to Personal Finance for Lawyers. I’m Rho Thomas, and as a busy wife, mom, and former Biglaw associate, I know all too well the tension between the culture of the legal profession and pretty much everything else you want to do in life. That’s why each week, I’m bringing you the information and tools you need to improve your money mindset and manage your money to create true wealth. Because ultimately, it’s not about the money. It’s about the freedom and flexibility the money affords.

Hey friend. Welcome back to the show. I hope you are doing well, having an amazing day so far.

Today, we are talking about getting off on the right foot or creating a fresh start for your finances. The new year is a time when people often decide to make changes in their lives, right, including finances. So we set these new goals; we decide to implement these new habits.

But the problem is, most people give up on that stuff by March, and I want to set you up to create a fresh start for your finances that you’ll actually stick with so that by the end of the year, you can see the progress that you want to make. So I’ve got three things that I want you to do to create your fresh start.

First, I want you to evaluate how last year went with your finances. If you set goals, what were those goals and how close were you to achieving them?

It might be that you didn’t quite get there by December, but if you keep going on that same trajectory, you can get there by March. Or maybe you set the goal and then you set it aside, and you never look at it again, so you’re nowhere near accomplishing it. Whatever the case is, I want you to reflect on your goals and your progress with them.

Then, I want you to reflect on the categories within your finances and think about what went well, what didn’t go so well, and what you want to do differently. So when I’m talking about the categories within your finances, I’m thinking about your spending, and this would encompass your spending habits, any spending plans or budgets that you’ve made, your cash flow, what’s in your bank account, or what has typically been in your bank account from month to month.

And then beyond that, we’re talking about your savings, your debt, your investments, meaning retirement accounts and any brokerage accounts or even alternative investments. I have a client who invests in art. Or I told you about my real estate investments, so thinking about that, and then also any other financial goals that you might have. So I’ve got a few clients who want to buy houses or who have milestone anniversaries coming up, and they want to do something special for it. Thinking about those kinds of things within your finances, reflect on how they went last year.

And again, you’re thinking about what went well and what didn’t go so well. And then you also want to think about what you want to do differently this year. So the what went well, what didn’t go so well, is the reflection piece. And then what you want to do differently is the things that you want to change moving forward. So that is the reflection part.

Then, I want you to make sure that the things that you’re thinking about within what you want to do differently are actually realistic. Because sometimes we plan these super drastic changes that we were never going to do in the first place. You’re literally setting yourself up for failure when you do that. You might be able to do it for a little while, but it’s not sustainable. So when you’re thinking about the things you want to change for this year, you want to make sure that they are changes you can actually stick with.

All right, so you’ve evaluated your year. You’ve evaluated what happened with your goals. Now I want you to set goals for this year. And I’d say, choose three goals to start with.

I like to make the goals things that feel doable, because sometimes when we set too big of goals, we stall ourselves out because we feel overwhelmed. So you’re thinking about all this stuff you want to do. I want to be completely debt free and stuff like that, and that just feels so big, you get overwhelmed, and you end up not doing anything.

Plus, when the goal is doable and you actually achieve it, then you’re showing yourself that you achieve your goals, and then you can set a new one that takes you even further. Achieving your goals feels good, and it keeps you moving forward. It keeps you motivated, keeps you in momentum.

Think about the opposite, like, let’s say I always set these huge goals and I never hit them, and I’m just failing over and over again, that might feel discouraging and lead to getting up altogether. So I like to set goals that feel achievable.

Now your overarching goal might be bigger. So for example, I stated at the beginning of this podcast my husband and I had over $670,000 of debt that we were working on paying off. That was a huge goal, but we broke it down into smaller chunks that were more attainable. So our first goal was to pay off the smallest loan that was something like $1,500 or $2,000 or something like that.

So you have a big goal. You might have a larger goal that you’re working towards, but you want to break that down into smaller, more attainable goals. By doing it that way, as you achieve each of those smaller goals, then you ultimately achieve that bigger goal.

So choose three goals to start with that feel doable. Maybe it’s building $1,000 buffer in your checking account and increasing your savings by $5,000 and paying off your smallest credit card, right? Those are three goals that are pretty achievable within a year’s time.

And from there, you’re going to prioritize those goals. So which one is most important to you? Focus on that one first, put all of your efforts and extra money towards that one. Because one of the biggest mistakes that I see people make is trying to achieve multiple goals all at once, and it leads to diluting your efforts and not making as much progress on any one goal as you could have.

So focus on one. Put all your efforts, all the extra money, all of that, towards that one, until you achieve it. And you’re going to be really surprised at how quickly you achieve it. Then you can move to the next one and the next one and so on.

All right, so now the final thing is going to be getting your cash flow in order. You can’t do any of this without cash flow. Well I guess you can reflect on previous year and all that stuff, but in terms of the things that you want to achieve and creating this fresh start for your finances, you can’t do any of that without cash flow.

You want to look at actual data. I want you to categorize your spending for the last month, maybe a different month, if you were spending more because of the holidays or something like that. But we want to have an idea of your typical spending to figure out where your money is currently going.

Then you’re going to decide if you like what you see. So is your spending reflecting your values? Are you spending more than you thought that you were going to? Are you spending on things that are actually important to you, or on things that you don’t care about? You’re going to think about those things, and then from there, you’re going to tweak what you’re seeing to create a plan that fits your life, your values and things that are important to you, all of that, but also allows you to free up more cash flow that you can use to achieve your goals.

I have talked before about the gap between your income expenses. That’s what we’re doing here. We’re creating a gap or increasing the existing gap. And this plan is going to be the baseline or the starting point for you. So we want to have some amount of money that you can use toward the goals that you have for this year and the things that you want to do differently, and all of that. This is your starting point.

But every month is going to be different. Maybe it’s someone’s birthday, or you’re traveling, or family is visiting from out of town, or any other number of things that can come up. Every month is different, and that’s okay. Progress is not always linear. It ebbs and flows. So go with it. Don’t freak out or get upset if you’re not able to save the exact same amount of money every single month. It’s okay. As long as you’re making progress towards your goal, you’re doing great.

And by taking the time to reflect on the previous year, create your goals for this year, and create a plan to achieve those goals, you’re setting yourself up to have a great year. You are setting yourself up for this fresh start with your finances.

Forget what happened last year, if you didn’t achieve your goals and all of that. Reflect on it, learn from it, but that does not define what you can do this year. And when you execute your plan, I guarantee you’re going to be much closer to where you want to be with your finances by the end of the year. If you need help, schedule a consultation at rhothomas.com/call and let’s talk about how we can work together.

Alright, so that is it for this week’s episode. Please take a second, subscribe to the show, leave a review. Both of those things help the show to get seen by more people. Helps me get this information in the hands of more people. And as always, I appreciate your support.

As we close out, friend, I pray that you take the information you learn here, apply it in your life, and open up to the realization that wealth is available to you. As you do that consistently, week after week, you’ll continue to take steps to take back control of your time, build wealth, and live the life of freedom and choice you deserve. Talk to you later.