Simple steps to get financially fit in 2021

New Years Resolutions to help you take charge of your finances…

man jumping from 2020 cliff to 2021 cliff representing asx outlook 2021

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Happy New Year, Fools!

Welcome to 2021.

Frankly, I'd hoped for a cleaner, COVID-Community-Transmission-free, transition from last year to this, but turns out we don't always get what we want. How very 2020.

Speaking of which, It is worth remembering that on this day, last year, we'd kind of heard of a new respiratory virus out of China, but had no idea just what a wrecking ball it would be.

Indeed, our time and attention was taken up primarily by the threat — and reality — of bushfires, unprecedented in size, scale and ferocity, that were menacing much of the country.

Yes, I know everyone is sick of the retrospectives.

My point, though, is a slightly different one: If we didn't know what was coming on January 1, 2020, why would you listen to forecasts for 2021?

I've been asked plenty of times over the past two weeks for my 2021 forecast. Each time, I politely decline, admitting that I don't know what's coming, and nor does anyone else.

And then I recite one of my favourite quotes, from John Kenneth Galbraith: "Pundits forecast not because they know, but because they are asked".

(The generous questioners laugh along. I dare say more than one of them makes a mental note to ask someone else next year. Such are the occupational hazards when you're a financial adviser.)

So, if you can't accurately predict the future, what should you do?

The first, hopefully self-evidently, is 'don't try'. 

Accept that you don't know, and move on.

The second is that you should, in the sporting and management consulting jargon, 'control the controllables'.

In other words, stop worrying about the things you can't control, but endeavour to do well those things you have within your area of influence.

Those are the things that can meaningfully improve your odds of investment success.

And yes, because it's New Year's Day, let's call them resolutions.

And here they come.

Spoiler alert, though. Well, two, actually.

One; this list isn't new.

Two: it's not magic.

This list is probably best considered the 'get rich slowly' list.

I can offer no guarantees (legally, or morally).

But this list is, in my view, the best foundation you can have, as you continue (or start) a journey to wealth creation.

No, it can't beat a trust fund, a lotto win, or an inheritance.

It won't instantly lower your bills or get you a pay rise.

But it's a list of actions and approaches that I think will put — and keep — you on the straight and narrow as you steadily build your wealth.

So here's to 2021. And to just a little less drama than last year…

Fool on!

13 Foolish New Year's Resolutions

To help you invest, better!

1. I will live below my means — spending less than I earn.

2. I will save money into a rainy-day fund so I'm ready for what life might bring.

3. I will pay off my credit card debt, and then only spend what I can pay off within the interest free period each month.

4. I will regularly add to my investment account.

5. I will invest money I don't need for at least 3-5 years to build my nest egg.

6. I will learn more about investing, taking control of my financial future.

7. I will invest in quality businesses, buying a slice of the company, not just a code on a screen.

8. I will buy shares in a company with the intention of holding them for the long term.

9. I will sell when my investment thesis fails, the company is overvalued or I have a better idea.

10. I will avoid anchoring my decisions to the price I paid for my shares.

11. I will remember that the market can be moody and over-react, both on the upside and the downside.

12. I will expect volatility, and I won't let it spook me into selling. Indeed, volatility can offer me great opportunities!

13. I will let the market offer me prices (be my servant), not dictate my mood or actions (be my master).

(Want a printable version? I'm glad you asked. Here it is!)

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Motley Fool Take Stock

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Motley Fool Take Stock

Why are bank shares up so much?

While we can speculate on the answer, I’m not sure the speculation is useful.

Read more »

Model house with coins and a piggy bank.
Motley Fool Take Stock

'Housing AND Super', not 'Housing OR Super'

Yeah, but a home is more important than super, right?

Read more »

A man wearing thick rimmed black glasses and a business shirt with red suspenders sits at his desk sorting through the earnings report of Nickel Mines
Motley Fool Take Stock

One big lesson from earnings season

There is a lot to take in.

Read more »

Australian notes and coins surrounded by a calculator and the word super spelt out.
Motley Fool Take Stock

A simple fix for superannuation

It's time to return Super to its original purpose, to remove the complexity and to stop it being used as…

Read more »

Legendary share market investing expert and owner of Berkshire Hathaway Warren Buffett
Motley Fool Take Stock

Buffett's latest thoughts on business, investing and Berkshire

Whenever Warren Buffett speaks, or writes, I pay attention.

Read more »

Businessman working and using Digital Tablet new business project finance investment at coffee cafe.
Motley Fool Take Stock

Ignore forecasts (and guidance)

Think like a business owner, not a speculator.

Read more »

Businessman at the beach building a wall around his sandcastle, signifying protecting his business.
Motley Fool Take Stock

Invest like a Roman general

Humility is something to be cultivated in all walks of life.

Read more »

wooden block letters spelling DCA
Motley Fool Take Stock

The beauty of dollar cost averaging

Because it’s Friday. And I’m going to cover some investing fundamentals. But you knew that.

Read more »