Taking stock of 2021 to plan for 2022

As our employers, and our own small businesses, start to focus on the coming year, it’s normal to think about what we want personally out of life in 2022.

Invariably that includes thinking about our personal finances.

As we do this it’s common to leap into big promises to ourselves to not repeat any of the mistakes we made with money in 2021.

For instance, we might say to ourselves, ‘I promise myself I will avoid financial stress in 2022’, or just ‘I will be better with money this year.’

These kinds of pledges to self are understandable, but can be ineffective as they are often based on willpower and guilt – perhaps because of the effect of financial stress on relationships. They are seldom based on detail.

They usually lack the substance of a well-thought out plan.

‘As the saying goes, a goal without a plan is just a wish,’ says Lea Clothier, behavioural money coach and member of the Financial Mindfulness team.

Maintaining manageable personal finances and, if possible, building towards a sustainable level of wealth is not something that happens by wishing.

We’re going to go into goal-setting in Financial Mindfulness blogs a little more detail in the coming weeks:

    • How to assess year just gone;
    • How to use mindfulness and visualisation to help set goals; and
    • How to monitor progress on goals and re-set them based on early attempts.

In order to create achievable financial goals for 2022 we need to pause and do a thorough self-appraisal of 2021.

As Ms Clothier says: ‘What can we learn and adapt from last year to have a better year with our personal finances?’

Review your wins as well as your losses

This is exactly what it sounds like: thoroughly take stock of the good and the bad from 2021 as it relates to your personal finances.

If you run a small business where your personal finances are closely linked to the business, include this too.

We start with the wins, because it’s essential they are not overlooked. They are just as important as the losses.

‘Reviewing our wins can show us our strengths and highlight things that have worked for us,’ Ms Clothier says.

‘Whether it’s a method, approach or strategy, we can learn to use this information to help us build other positive money habits and reach other financial goals.’

What behaviours, decision, choices and circumstances clearly led to ‘wins’ around money?

Did you opt for sensible caution over a decision in 2021 and then see evidence later that the riskier path could have proved a disaster?

Did you diversify your investments and end up pleased with the outcome?

Did you notice a period last year where you saved well and kept your spending down while you were following a budget?

What did you do to contribute to wins that felt accidental?

Write it all down in as much detail as you can:

    • Dates, amounts;
    • The nature of key transaction/s;
    • Other parties involved;
    • The research you did and the support you got;
    • Where you didn’t do research or get support/advice; and
    • How the outcome was aligned with your goals, or where it was out of step.

Take exactly the same approach with your losses, no matter how uncomfortable it is to do so and how much you wish you could just avoid this bit.

‘Our losses can show us important information in order to avoid repeat losses or mistakes,’ Ms Clothier says.

‘There is no more important lesson in the world than having a failure.’

How to make sure you’re doing a useful self-assessment?

In a word, honesty.

Try to look at what happened for you with money in 2021 objectively. If you become unsure you are being objective, seek other people’s feedback or support.

If you get stuck you might want to seek a professional’s advice, such as a money coach or financial planner, or if your focus is on debt, a free (government-funded) financial counsellor is probably a good option.

A few points on how to approach appraise your wins and losses:

    • It’s crucial to be honest – don’t skim over a loss, or minimise a win;
    • In deciding what’s a win and a loss, balance what your feelings tell you vs; what your account balances say. Both facts and emotions are useful in this exercise. Context is important; and
    • Ask a trusted advisor if you can share your list of wins and losses. Ask them if they think you’ve missed something out.

Ask yourself: Was there anything missing or lacking in my/our decision-making process?

Did you do enough research? Did you have the right strategy and approach?

Did you have the support needed?

Assessing past goals

As mentioned earlier, before we dive into setting new goals, it’s important to take stock, and part of that process is examining the goals we had.

What about those goals worked and what didn’t?

Most of us set goals and objectives with the best of intentions and if we can achieve something positive from our goals, we could probably call that a win.

What if our goals didn’t work out as we’d hoped, or completely failed?

In that case, it might be prudent to gauge honestly whether your goals were realistic?

If they weren’t, then re-set your expectations.

‘Small steps of continual progress towards goals can often be more motivating and achievable than big leaps,’ Ms Clothier says.

A failure is not all bad – in fact in almost every case it can sow the seeds of successes to come.

‘Usually, the problem we face hides the solution in it,’ Ms Clothier says.

‘For example, if we didn’t hit our saving mark because we didn’t have a budget in place, then it might be a good time to set up a spending plan for the year ahead.’

‘Or if unexpected expenses chewed into our savings buffer, can you plan ahead for this year.’

The issue of having appropriate support has been touched on, but in relation to your goals, did you have accountability with them?

Other points to consider when assessing the success of your goals might include:

    • Did you stay motivated to stick to them? If not, why not?
    • Did you have the tools, including the technology, to support your goals?
    • Did you stay mindful of your long-term goals? (Do you have long term goals?)
    • Did you stay mindful of your values during all financial decisions? If not, why not?

What is your underlying mindset?

One of the most persistent and pernicious reasons our financial goals fall away, we lose motivation, or we never seem to get ahead is our mindset.

‘We always have more options than we often realise but if we have a negative mindset, or scarcity mindset, we’re not likely to recognise or see the opportunities that might be right in front of us,’ Ms Clothier says.

Our core beliefs about money can be very deep-seated. Uncovering them and developing a more positive outlook on money may take extra support, for example from a financial therapist.

‘Ask for support, get a coach, read a book, do things differently. We can’t keep doing the same thing and expect a different result,’ she says.

Make sure to journal about what you find and highlight any key insights.

These will be invaluable in setting, assessing and re-assessing goals in the days and weeks to come.

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