How to keep your financial New Year’s resolutions
Written by Paul Dodd on January 05, 2015.
As we welcome in the new, bright, shiny year that I hope 2015 will be for each and every one of you, many of us will all be caught up making new year’s resolutions to lose weight/get fit/stop smoking/insert your own personal goal here. We go through this charade every year although more often than not our resolutions lie in tatters come the end of January.
Have you ever thought about why that might be? I’d say that for many of us a lack of strategy and over-optimistic goals are to blame. In our new year enthusiasm, we tackle our resolutions with a gung-ho approach intending to go from doing no exercise at all to running a half marathon six times a week. Unrealistic targets such as these set us up for failure and when we don’t reach them in week one, we feel demoralised and give up.
Increasingly, many of us are including finances in our new year’s resolutions. A survey carried out in 2013 revealed that 54% of Americans consider making resolutions regarding their finances with the top three resolutions being to save more money (54%), pay off debt (24%) and spend less (19%). Given how much our financial situation influences so many other areas of our lives, including our relationships, physical health and mental stability, it makes sense to make financial resolutions but how can we ensure success rather than failure for our good intentions?
Here I offer you my top tips to keeping your financial new year’s resolutions:
1. Start with the basics
Start simply by understanding exactly where you are financially. It sounds obvious but you’d be amazed just how many people don’t have a clue how much they do, or don’t, have in their bank accounts. Work out your assets, your debts and your income and ascertain key areas of expenditure. Only once you know exactly where you are at can you work out how you are best targeting your new year resolutions. If you have credit card debt of $20,000, there is no point in resolving to set up a savings account when the money you save will be earning less interest that the amount you are paying on your debt. Your resolutions must fit with your own unique financial situation.
2. Set realistic goals
Just as the over-optimistic recent couch potato planning to exercise for an hour every day is doomed to failure, pledging to invest a large chunk of your monthly salary if you are not used to saving is likely to prove too much of a challenge. Start with small but manageable targets and work up from there. Even small amounts set aside every month will soon add up and motivate you to continue.
3. Be specific
Just as the woolly resolution to “do more exercise” is always going to be less effective than the specific “go running on Monday, Wednesday and Saturday mornings”, promising yourself that you will “save more” is always going to be harder to stick to than “save $100 per month”. Set specific goals and remain focussed on those throughout the year.
4. Make it easy for yourself##
Automating your savings will help you stick to your resolutions. Set up an automatic transfer of the money you wish to save each month as soon as you are paid so you are not tempted to spend it.
Strategy and goals are key to maintaining your financial resolutions for 2015. Plan well and this time next year you will be looking back on a successful year and moving your resolutions up a gear for 2016. I wish you all a happy, healthy and financially rewarding year.