By FPA member Kevin Moore, CFP®, AIF®

As is customary this time of year, we begin to reflect on the year that is ending as well as the approaching year. This process can create a desire to “improve” one’s life in the coming year. This can result in diets, a commitment to increase exercise, or new approaches to handling your finances. As with commitments to diets and exercise, new approaches to finances can be fraught with both promise and peril. Here are a few things to consider when thinking of new ways to approach your finances in the New Year.

Promises

• Thinking about a new approach to finances should start with a goal. Much like identifying the number of excess pounds you wish to drop with a new diet/exercise routine, financial matters should be approached with a well-defined goal. This goal could be increasing savings by a specific amount, paying down debt by a specific amount, reducing the number of credit cards, increasing the amount invested in your 401(k), etc. The objective is to create a goal that passes the “3 M” test — meaningful, measurable and “meetable”.

• A goal that meets the “3 M” test can also lead to long-term behavioral changes. It is said that it takes 21 days for a new behavior to become a habit. This is as true with weight loss as it is with financial matters. Thus, if possible, break your “3 M” goal into weekly actions that can be taken. This frequency should not only improve your finances, but increase the likelihood that your new behavior will become a habit.

Perils

• For many of us, there may be several things we would like to change about our financial situation. While there may be many things that need changing, trying to do too much will only increase the chances of not accomplishing anything. Therefore, it is important to focus on the area that is most important to you. Taking this approach can not only improve your chances of reaching that goal, but can provide confidence to meet additional goals. For example if retirement is a goal and the amount of money you need to save seems daunting, instead of focusing on a large number, focus on increasing your monthly savings by 10 percent. Try this for a few months and once it becomes a habit, then consider increasing it further.

• It is common for people to view their lives in compartments. This means that our work life may separate from our home life or that our “home” self may be different from our “public” self. While this may seem logical, it is important to remember that our financial behavior is ever present. Thus when thinking about changing our financial behavior, it is important not to think of it as being separate from the other aspects of our lives.

The end of the year can be reflective and inspiring. To improve the chances of reaching your financial goals in the coming year, it is important to remember the promise and perils of New Year resolutions. Perhaps by acknowledging these aspects of resolutions, we can increase our chances of success.

FPA member Kevin Moore, CFP®, AIF®, is a principal at i*financial. Securities and advisory services offered through Commonwealth Financial Network®, member FINRA/SIPC, a registered investment adviser. Strictly intended for individuals in: CA, CO, CT, DC, LA, MD, MN, NC, OK, OR, TX, VA, WA, WI. No offers may be made or accepted from any resident outside these states due to various state and registration requirements regarding investment products and services.