New year – new you, or new goals?

New year resolutions have been around for a while now – they date back to over 4,000 years ago when the Ancient Babylonians would celebrate the new year during the Akitu festival. This was a 12-day festival that happened at the start of every April which celebrated the rebirth of nature, re-establishment of the kingship by divine authority, and security of the life and destiny of the people for the coming year. During this festival, they made promises to the gods to pay their debts and return borrowed items. They believed that if they kept their word during that year, the gods would bring them good fortune for the year ahead, and bad fortunes if they did not.

A lot of things have evolved since then, including when we recognise the start of the new year in the EU, and as with everything else, new year resolutions have also evolved over time. These would normally reflect circumstances during that time. For instance, in the middle ages in parts of Europe, Knights would renew their vow to chivalry at the end of the year during an annual Peacock Vow (where they would place their hands on a live or roasted peacock). Modern day resolutions tend to revolve around changing or improving our lives in the coming year. We see the potential for positive improvement in the future and by setting goals we are encouraged to take action. These kind of goals can relate to any area of our lives, such as our health, fitness and weight, our mental well-being and spirituality, our relationships and of course, our finances.

For those celebrating the Chinese New Year this week, it is also a time for renewal, a clean start setting goals for health, happiness and financial security.

An area for improvement in our financial lives is often our financial resilience – this is the ability to withstand life events that impact financial security and well-being. As I explained in a previous article, (https://blackswancapital.eu/does-money-make-the-world-go-round-or-keep-you-up-at-night/) there is very little that can worry you more than threats to your financial security.

There are many ways in which you can improve your financial resilience.

The first step will be to build your emergency fund. This will provide a cash buffer for unexpected expenses and bills, emergencies, and peace of mind in case you lose your primary source of income. Ideally, this fund will cater for three to six months’ worth of expenses, however, start by aiming to save one month’s expenses in liquid cash. Remember, it’s the accumulation of small goals that leads to the achievement of big ones.

Saving extra money can be difficult for us all, but there are countless ways to do this. You may set up automatic bank transfers to your savings accounts, or reduce unnecessary spending.

You may also decide to diversify your streams of income and bring in some extra cash from a secondary source. You may decide to sell some old clothes, lend your car to a rideshare app, or look after other people’s pets whilst they’re on holiday.

Another option is to create a personal budget. This can sometimes feel restrictive, but budgets are helpful tools for tracking your spending and can help you identify how you can reduce your spending and save more. Budgeting has become especially important in light of recent inflation figures over the past eighteen months which we can all see in all our bills, especially our groceries, transport and energy bills. A useful budgeting method is the 50/30/20 plan where 50% of your income goes towards necessities (such as rent, food and clothing), 30% goes to lifestyle and leisure (such as eating out and cinema tickets), and 20% goes to your goals and savings (such as your emergency fund and debt pay-off).

Despite the notoriously low success rate for new year’s resolutions (less than 10% are successfully kept), there is significance and importance to set them each year.

Firstly, they are there to mark the start of a fresh year and may feel like you are setting a reset button – you set new goals, revisit old ones, and determine how to improve to meet them this year.

Secondly, sitting down to think about goals is an important step in going where you want to – it provides direction and motivation and can help set you on the right path to achieving your goals.

Finally, setting a resolution is similar to making a commitment to yourself to make improvements to your life, which makes you feel good, which in turn will encourage the behaviour required for you to reach your end goal. Ultimately, all resolutions stem from a place of self-improvement and fulfilment, the recognition of where you want to be and what you want to achieve long-term.

Our two cents: As humans, we function best when we have a clear picture of where we want to be and what we want to achieve. Setting a new year’s resolution is a way to help you get started with painting this picture. Once you have your goal in mind, draw a map as to how you are going to get there. That’s where Black Swan Capital can help!