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Money can be a big cause of stress (Or maybe I should say a lack of money is the real cause of stress). We’ve just come through some tough times both from an economic standpoint and a market perspective. Debt levels continue to grow to record levels. Unemployment rates are higher. If you are looking to improve your financial life, what kinds of things can you do?

Short-term goals versus long-term habits

It’s that time of year when people make new years resolutions. For a lot of people, resolutions are nothing more than short-term goals. There’s nothing wrong with short-term goals but far too often resolutions are too temporary in nature. We often see this in the health industry, where there is no shortage of ‘diets’ to help people lose weight. The problem is that although many people can lose weight on diets, weight loss is often not sustainable over the long term. The only way to sustain weight loss over the long term is to change your lifestyle and develop good long-term healthy habits of eating right and exercising regularly.

Financial success is no different. You can have short-term successes but unless you change your bad financial habits for good ones, those successes are often temporary. For example, I’ve seen people’s credit card balance ‘yo-yo’ just like people’s weight. They get focused “for a while” on paying down debts they should not have had in the first place, only to find that they ramp up spending and get into debt trouble again somewhere down the road. Real success comes from changing your lifestyle or your habits of spending so that you do not fall into old patterns again. Long-term success comes from permanently changing long-term habits.

Take control of your money

One of my popular workshops called “Take Control of Your Money” focuses on helping people develop good healthy financial habits. For those of you who want to improve your finances but are not sure where to start, here are a few key habits that will put you on the path to financial freedom.

Know your worth. If you don’t know how much you are worth, then how can you possibly know if you are moving in the right direction? Develop a regular habit (at least once per year) of putting together your net worth statement. Manage your debt. Debt is a big cause of financial stress. When debt becomes unmanageable, stress increases exponentially and affects all aspect of your life. Manage your debt and you manage your stress. Know the difference between good debt, bad debt and no debt. Live within your means. Because of access to debt, it is so easy to live beyond your means. There is no magic pill in personal finance. You can only spend what you make. If you continue to spend more, you will be in trouble. We live in a society that loves to spend. We live in a world of delayed consequence over delayed gratification and many are facing those consequences today. Know where your money is invested. I run into too many people that have no clue what they are invested in. Many have financial advisors that look after their investments. I don’t care if you have an advisor or not. You have to know what you are invested in. Managing your assets and your wealth is a big part of financial success. Take some time to review your statements and learn about your investments. Nobody cares about your money more than you! Peace of mind with three financial documents. Insurance is not the only way to protect your financial affairs. It’s also important to review your will, power of attorney and personal directives. These are three legal documents you cannot go without! Together, they form the foundation of estate planning. Protect your financial life with insurance. Review your insurance and make sure you have protected yourself against certain risks. Review your life insurance, disability insurance and other types of insurance coverage.

This list can create opportunities for anyone looking to improve their financial situation and may not know where to start. Financial resolutions create the opportunity for change. That change can be temporary or permanent. Whatever your resolutions are, my hope is that the New Year helps you start the process of developing great long-term habits towards true financial independence. Happy New Year and Good Luck!