If you’re anything like me, the start of a new year is filled with goal setting, planning, and reflecting on
what you want to achieve. Many people call this their New Year's Resolution.
However, these goals often fall short because we don’t dedicate enough energy to them to gain traction. In chemistry, this concept is called activation energy—the minimum amount of energy required for a chemical reaction to occur.
In our personal lives, this “minimum energy” is often more than we expect. Not only do we need enough energy to start something, but we also need to sustain it through to the conclusion. Too often, we approach our goals like starting a fire with only paper: it ignites quickly, burns fast, produces little heat, and dies out almost immediately. To build a lasting fire, you need more than paper, you need kindling and eventually firewood.
When we neglect this principle, we end up living the same year 20 times over, akin to starting the same fire over and over without changing our approach.
So, how do we avoid this cycle?
I recommend stepping back and assessing your values before making plans and setting goals. My favorite way to do this is through a values sort exercise like the PERSONAL VALUES Card Sort from the University of New Mexico. This quick exercise helps you to identify what is most important, important, and not important to you. It provides valuable clarity about what truly matters, ensuring your goals are aligned with your values.
Once you’ve clarified your values, you’re ready to tackle the nuts and bolts of your financial plan.
Step 1: Update Your Goals
With your values in mind, evaluate whether your goals still align with them. Ask yourself:
Do I need to revise my goals?
For example, consider goals related to saving, spending, income, assets, debt reduction, or financial growth. A tool like a Financial Scorecard can help assess your current position and identify areas for focus.
Are there any significant life events on the horizon?
Examples include retirement, Social Security or Medicare eligibility, or family changes such as births, adoptions, marriages, divorces, or deaths.
Step 2: Assess Cash Flow
Cash flow and personal values are intricately connected. Cash flow reflects the small, everyday financial decisions we make, and when it’s misaligned with our values, it can derail our goals.
Here’s how to assess your cash flow:
Use a tool like Elements to categorize your spending into Savings Rate, Burn Rate, Debt Rate, and Tax Rate. This process often reveals gaps between how you think you spend and how you actually spend.
Key questions to consider:
Are you overspending?
Are you saving too much, creating a mismatch with your values? (Yes, over-saving can sometimes happen!)
Should you reduce debt?
Do you need tax planning?
The ultimate goal is to realign your finances with your values and uncover hidden opportunities for improvement.
When you start the year by aligning your financial decisions with your core values, you do more than organize your finances—you create meaningful momentum. Instead of lighting a fire with just paper and hoping for the best, this process is about gathering kindling and firewood for a fire that will last all year.
At Wichita Wealth, we specialize in helping individuals and families create financial plans that align with their values and goals. Whether you're looking to fine-tune your cash flow, set realistic goals, or navigate life’s transitions, we’re here to provide guidance and support every step of the way.
In Part 2, we’ll dive deeper into the practical aspects of financial planning, including the catalyst that can make this process easier—your financial “easy button.