During this time of year, it is common to make resolutions. Perhaps to exercise more, eat healthier, or spend less and save more. Unfortunately, though, these good intentions often go by the wayside as life tends to get in the way.
The tradition of New Year's resolutions dates back to 153 B.C. January is named after Janus, a mythical god of early Rome. Janus had two faces — one looking forward, one looking backward. This allowed him to look back on the past and forward toward the future. On December 31st, the Romans imagined Janus looking backward into the old year and forward into the new year. This became a symbolic time for Romans to make resolutions for the new year and forgive enemies for troubles in the past. The Romans also believed Janus could forgive them for their wrongdoings in the previous year. They would give gifts and make promises, believing Janus would see this and bless them in the year ahead.
In 2012, Google created a “Resolution Map” where people can add resolutions and see others adding theirs in real time. You’re probably not too surprised to hear that the numbers are bleak when it comes to the amount of people who maintain their resolutions; only 9.2 percent of people were successful in sticking them out. Of those who failed, 35% admitted they had unrealistic goals, 33% of participants didn't keep track of their progress, and 23% forgot about them. About one in 10 respondents claimed they made too many resolutions. Based on Google’s data, the most popular resolutions were:
Even though the origins of New Year’s resolutions date back over 2000 years, much of their meaning has been retained even to this day. While we might not give gifts to celebrate the coming new year, most of us reflect on the previous year and make at least one resolution to improve our life. Given the track record Google has observed, it might be surprising that year after year people still resolve to make positive changes in the new year. However, much like spring is seen as a renewal, New Year’s is a time when we can all start with a clean slate, and who doesn’t like that opportunity?
When it comes to financial resolutions, most people vow to spend less money or to save more for a particular goal – usually retirement. As far as saving more money, though, there is another aspect that may be overlooked. Achieving a financial goal can be thought of as a two-pronged approach – saving more and investing more.
The “saving” part is often easier for people since it is more tangible and easily defined. It’s the “investing” side that frequently is more difficult. This may very well be due to the risk inherent in financial investments. There is no risk, to speak of, in saving money, but there certainly is when it comes to actually putting that hard-earned money to work.
The more investors understand financial risk, the more they are apt to embrace it. Unfortunately, many investors do not fully grasp the role of risk in a portfolio. A survey by Natixis Global Asset Management indicated that three-quarters (76%) of investors admit that they don’t have a solid understanding of risk. This lack of comprehension makes achieving investment goals all the more difficult.
So, perhaps a reasonable financial New Year’s resolution is to define your investment goals with the help of your financial advisor, save a few extra dollars each month, and invest your money in the markets knowing that no reward can come without taking a certain amount of risk.