Six principles for a prosperous New Year

Steve Merrell |

I know I’m a bit old-fashioned, but I firmly believe people are happier and more satisfied when they live according to correct principles. They are also more prosperous. During my 35 years in the financial markets, I have seen plenty of people try to find success by chasing wild hares, but I have rarely seen them achieve it. On the other hand, I have seen many people achieve great prosperity by steadily applying basic principles over time. Here are six to focus on in 2021.

Principle 1: Unclutter your financial life. Marie Kondo has become a multi-millionaire by helping people learn the simple joy of cleaning out their closets. You can feel a similar joy by cleaning out your financial life. Consolidate redundant accounts, clean junky investments out of your portfolio, set up a spreadsheet to track your credit card and other debt, and cancel unwanted subscriptions and unused memberships. Uncluttering your financial life will bring clarity and empower you to live the other principles.

Principle 2: Live within your means. When you spend more than you make, you reduce your freedom. As soon as you borrow a dollar, your creditor has claim on you. If you want to be financially free, you have to get out of debt and stay out of debt. Financial guru Dave Ramsey says getting out of debt requires “gazelle-like focus.” If you have ever watched a nature video of a gazelle trying to outrun a cheetah, you understand what he’s talking about. During the chase, the gazelle is focused on only one thing--escaping the cheetah. That’s the kind of focus you need to get out of debt and stay out. Once you have that kind of focus, your financial advisor can help you develop a plan to escape your cheetah.

Principle 3: Keep a rainy-day fund. You need to develop financial resilience, or the ability to deal with the unexpected shocks without losing your financial footing. If you are living paycheck-to-paycheck and have no emergency reserve, even a small financial hiccup can turn into a significant reversal. If you don’t currently have a reserve, start small. Anything helps, but I recommend building a reserve of at least 3 months’ worth of core living expenses. As your wealth accumulates, you can grow your reserve to 12 months.

Principle 4: Get help with your portfolio. Several academic studies have shown that most people are not well-equipped to manage their own investments over time. Building a strong portfolio is difficult and managing the portfolio in volatile markets can be even more challenging. Emotions can get in the way resulting in poor investment decisions. A better approach is to work with a trusted professional who takes the time to understand your goals and can structure a portfolio to fit your needs.

Principle 5: Get a plan and live your plan. A well-designed financial plan is essential in our crazy world and can help you avoid the perils of making knee-jerk reactions. Some people may stumble into money (think about lottery winners), but I have never seen anyone stumble into financial freedom. Attaining financial freedom requires intentional effort and sacrifice. It requires deferred gratification, which is rarely an easy choice. A well-designed financial plan can help you map the path to financial freedom. It can also help develop the resolve needed to pay the price for financial freedom.

Principle 6: Hold steady. Once you have charted your course in a financial plan, you need to maintain the discipline to stay the course. Financial success takes years to achieve, during which time you are certain to face many ups and downs. World events may challenge you. Personal circumstances may change. Through it all, you may need to update your plan to reflect certain new realities. However, having a defined plan will help you stay honest with yourself and true to what you really desire to achieve.

These principles are not complicated, but they do require a degree of self-discipline. A professional advisor could be a great resource to you as you systematically work to apply them in your life. Good luck and best wishes for a prosperous 2021.



Steven C. Merrell  MBA, CFP®, AIF® is a Partner at Monterey Private Wealth, Inc., an independent wealth management firm in Monterey.   He welcomes questions you may have concerning investments, taxes, retirement, or estate planning.  Send your questions to: Steve Merrell, 2340 Garden Road Suite 202, Monterey, CA  93940 or email them to