For nearly all of us, there’s at least one area of our financial lives and money-related habits that we’d like to make better. Taking a step back and seeking a fresh start can be essential to invigorating our financial outlook, approach, and priorities. Whether you want to increase savings, reduce unnecessary spending, develop a stronger money management plan, or otherwise improve your habits, a financial reset can be an excellent way to start working toward these goals.
What Is a Financial Reset?
A financial reset is a process through which you can strategically evaluate your personal financial wellness, and then restructure your practices and habits accordingly. While individual objectives for a reset will vary, the overarching purpose is to help you achieve your financial goals and improve your long-term financial well-being.
You may want to consider planning a financial reset if:
- You’ve experienced a major life event, such as a marriage, a divorce, a birth in the family, or a career change.
- Your income has significantly increased or decreased.
- You realize that you’d like to make significant financial changes or that you’re consistently failing to meet your goals.
- Your financial goals have otherwise changed or evolved.
How To Perform a Financial Health Reset
To reset your finances, first evaluate your current standing, then ask important questions, and finally use the insights you gain to make adjustments. Follow these tips for a financial reset to identify what you need to change about your money-related habits:
1. Assess Your Current Financial Standing
Begin by examining documents such as your bank, credit card, and investment statements to determine where your finances currently stand. During this review, aim to better understand whether your existing money management plan is effective and whether you’re heading in the right direction. Evaluate:
- Your income versus your expenses
- Your credit score and credit report
- The value of your savings and investments
- The overall amount of debt you’re carrying
- Your net worth (calculated by subtracting your liabilities from your assets)
- The changes in your debt, savings, and investments over the past year, along with the direction each is heading
- Your progress toward reaching financial goals, such as saving for retirement, building a college fund, or setting aside funds to buy a home
2. Reflect on Your Recent Financial Actions
Carefully review the financial decisions (especially any major ones) you’ve made over the past year or two. Assess whether the moves were helpful or harmful to your overall financial wellness by asking these questions:
- How have my finances changed, and what role did my financial decisions play in the changes?
- Knowing what I know now, what would I have done differently?
- Have the ways I think about and handle my money changed?
- Were my money-related decisions in line with my financial imperatives, aspirations, and values, and did they help me make progress toward reaching my goals?
- What have I learned?
You may find that you’re making good financial decisions and are on a path to success, or you may learn that changes are needed. Either way, careful evaluation and consideration can inform your money-related priorities and decisions moving forward.
3. Grow Your Financial Skills and Knowledge
Are there any things about money and personal finances you’d like to know more about? Maybe you’d like to learn more about the benefits of having a good credit score and how you can improve yours. Or maybe you’re looking to grow your knowledge about what a 401(k) is and how to build your retirement savings. Once you’ve identified any finance-related areas where you’d like to increase your skills and knowledge, take the steps needed to learn more. (Exploring helpful resources like The Southern Bank News and Blog page can be a great starting point.)
4. Update Your Financial Goals
Your financial goals can evolve over time, especially as you experience major life changes such as getting married, changing jobs, buying a home, or growing your family. Think about what matters most to you, and then determine what future financial achievements you’d like to prioritize.
5. Revisit Your Plans and Make Any Needed Adjustments
Now that you’ve updated your objectives to better align with your current and future priorities, you may need to reset your financial planning accordingly. Review your existing plans and activities and make any necessary adjustments to facilitate achieving your financial goals. Small adjustments can lead to big results over time, no matter what kind of spending, saving, or other finance-related changes you aim to make. This is especially true when it comes to modifying long-established financial habits. In most cases, you’re more likely to find long-term success by taking small, achievable steps and building on them, rather than attempting massive changes.
At The Southern Bank, we pride ourselves on offering friendly, personalized service to all of our customers — and that includes providing guidance when you have questions about any of our banking services. To learn more about mortgages, personal loans, savings and money market, and certificates of deposit, check out our Personal Banking page. Or, visit one of our local branches for in-person service with a smile.