Blog | Personal Finance

New Year, New Goals

Your 2023 resolutions should support your dreams of financial freedom

While many of you are happy to begin a fresh, new year full of possibilities, others of you are losing sleep over your shocking credit card bills from holiday spending. In fact, according to Lending Tree, the average holiday debt for Americans this year approached $1,550 - an all time high in the survey’s 8-year history. Almost 40% of holiday debtors will take five months or more to pay off that debt. Yikes.

If you are part of this group, it’s time to stop feeling sorry for yourself. Instead, spend the next few days setting goals to help you grow your financial education.

Goals for the new year

If you’re a Rich Woman or studying to be one, you are probably familiar with your numbers and have no problem managing your money. But if you are scared of numbers and have spent your life not knowing how it affects your financial well-being, there’s no better time than now to change.

Below are some goals for the new year to help you reach your dreams of true financial freedom.

Know your numbers

As I say in “It’s Rising Time!,” if you want to be financially free, you’ve got to be comfortable with your numbers, which are simply your scorecard on how well you are managing your money. And don’t worry if you aren’t comfortable dealing with numbers. Most of us were not thoroughly taught about money or finances in school.

Today’s youth need to be exposed to financial literacy from various sources, not just from financial institutions or government programs focused on their IRAs, investment funds, savings accounts, and more. That’s why we’re creating new, financial education applications, tools and games at The Rich Dad Company and using the latest technologies to help everyone increase their financial literacy.

Change your attitude about finances

Finances aren’t scary; but if you’d rather not deal with them, it’s probably a sign of something else:

• Maybe you know you are spending too much?

• Perhaps you rely on someone else to handle your finances for you?

• Or maybe you don’t want to admit you are just too lazy to learn what’s necessary to be financially-free?

Do any of these sound familiar? If so, it’s time to wake up and take action! Here’s a simple activity to help you overcome your fear of numbers. As one of my teachers told me,

“If you can’t define it, then you can’t have it.”

When you come across something you don’t understand, look it up. For example, some of the numbers you’ll need to know on your journey to financial freedom are:

• P/E (Price/Earnings)

• NOI (Net Operating Income)

• ROI (Return on Investment)

• Cash Flow

• Assets/Liabilities

If you don’t know what any of these words mean, look them up right now. You’ll instantly increase your financial intelligence and feel more comfortable about these “numbers.”

Understand the meaning(s) of debt

As some of you new to Rich Dad and Rich Woman may not know, there is such a thing as good debt (debt is not always a four-letter-word that can make your life miserable!). While the credit card debt you may have now from holiday spending is bad debt, good debt will most likely be part of your plan to reach financial freedom. And it’s easy to tell the difference depending on what the debt is for.

• Bad debt is when you borrow money to purchase clothes, shoes, a car, and other things you consume. Once you purchase an item, that’s it. You may get instant gratification and enjoy your new purse, truck, big-screen television, etc., but your purchase doesn’t increase your cash flow. You must pay the debt yourself. This type of debt takes money out of your pocket (that’s why it’s known as a liability).

• Good debt is when someone else pays it for you. This is when you use other people’s money (OPM) to purchase assets. For example, if you get a loan to start a business, you use the positive cash-flow from the business to pay off the loan. Or, when you purchase a rental property with a loan, your tenants’ rent covers your loan payments.

Unlike liabilities, these purchases are assets because they put money in your pocket — when the loan payments are made and there is money left over from your investments, you create positive cash-flow.

Make a good debt resolution

If you are tired of struggling with bad debt, the new year is the perfect time to make changes in your life. Remember, not all borrowed money is bad debt.

And if you have no idea how to obtain good debt, then it’s time to start your financial education. Acquiring good debt is just a matter of learning how to do it and taking action. Begin with the Triple A Triangle™: Aspire, Acquire and Apply. Set goals for this year and the future, get the knowledge you need and take action on what you learn. Then, next year at this time, maybe you won’t be paying off liabilities but cashing checks related to your assets!

What about investing in 2022?

For anyone who came through the holiday season with a little extra money (that doesn’t need to go toward paying down debt), now is the time to put that money to good use: investments.

I get this question a lot: “I have $5,000 to invest. Where should I put it? Do you have a hot tip for me?”

The reality is that for most people, when it comes to investing, they simply want to be told what to do rather than figure out what to do for themselves. People love a quick fix.

Spoiler: There is no quick fix.

No time of year do you see this more prevalently than in the New Year. People want to lose weight, so they jump on the latest fad diet, only to abandon it a few weeks later. People want to stop smoking, so they throw away that half-smoked pack, only to buy a new one a couple days later.

Unfortunately, they don’t do the hard work it takes to build the necessary foundations to win in the long term.

Remember, success is a process

New Year’s resolutions are a process. You can’t just change your life with the flip of a calendar. It takes hard work over a sustained period of time with a good plan to make a change. This is just as true when it comes to investing.

Financial independence doesn’t happen overnight. There is no quick fix. Investing is like learning a new language; you don’t become fluent in one day. You must practice, practice, practice.

In the process, you will make some mistakes. But as you keep up with it, just as with a language, you will become more and more fluent. Every mistake you make simply makes you smarter.

What does this mean for you?

At the end of the day, we can speculate all we want. It's nice to think everything will go smoothly in 2023 but we know that's just not realistic. We can't know the future, so the only way to prepare is to turn your focus inward.

Instead of wringing your hands in fear, or sitting back comfortably because you think everything will go your way, take 2023 into your own hands and start crafting a strong financial plan that can sustain you no matter what happens.

Start by identifying what you hope to achieve. I find the act of physically writing down my goals the best way to get my vision out in the open. Once it's written down, I'm committed to it.

As we all know, it's all too easy to fall off the wagon with our New Year's resolutions. That's why you have to set up goals that in turn set you up for success. I've written before about how to do this by setting SMART goals, and now, with the new year approaching, this task is more important than ever. Remember, SMART goals are: Specific, Measurable, Attainable, Realistic, and Timely.

When your goal meets these five characteristics, it becomes much easier for you to stick to them. And remember, every goal should be pushing you towards a greater vision of where you want to be.

Another way to make sticking to your goals easier is by getting others involved. Whether it's your spouse, your kids, your friends, or a mentor, you can find a partner to help keep you dedicated to your goals. We all know it's easier to go to the gym when we have a friend going with us. The same holds true for financial freedom.

With your goals in mind, you can start making a list of what you'll need to attain them. Maybe you need an increased understanding of real estate. Maybe you need to understand how to invest for cash flow. By knowing where you are, and where you want to go, it should quickly become apparent the things you must learn to get there.

This New Year’s, take some time to write down your goals and figure out what the process will be to get there. Also, reflect on the mistakes you made in the last year. How can you learn from them? What lessons do they hold for you? How can you apply those lessons in the coming year?

And then, begin your journey to success.