Making Financial New Year’s Resolutions Modest Helps Keep Them
Posted By GoodCall Contributor on December 23, 2016 at 3:16 pm
Lose weight. Get organized. Spend less/save more. These were three of the top 10 resolutions for 2015, according to statisticbrain.com. The website also reports this dreary statistic: 45% of Americans usually make resolutions, but less than 50% of them keep up them.
Why? Because they require a switch in the way people approach their lives. Any ingrained behavior is hard to change. That’s one reason those weight-loss resolutions often fail.
With financial resolutions, experts say it’s important to put systems in place to help hold you accountable. Start by getting specific. Many people make vague resolution s– something like declaring they want to be better stewards of their money. What does that mean exactly? How will someone know if they succeed?
Getting started with a financial resolution
Will Johnson, founder of WorkPlay401 (k), defines an obvious way to begin: “The first step that everybody can – and should – do is create a budget every month in 2017 and track their spending throughout the year. Seeing where your money is going as you spend it is the biggest driver to changing spending behavior and to start making progress toward your financial goals.”
Mike Catania, founder and chief technical officer of PromotionCode.org, agrees with Johnson that learning about spending is important. “A common mistake is acting before you have a complete dataset about your expenditures,” he says. “This under-collection of data leads to decisions that are not tenable for the long term and will result in frustrated budgeters and a general disdain for the concept.”
Catania says it’s better not to rush into things. “Track your budgets for a full quarter before even start to evaluate what changes might be reasonable.”
Small changes make progress toward resolutions
Budgeting can only take you so far, of course. Saving money also requires spending less. Johnson emphasizes small changes that can help. “Simple things we recommend for saving money include always making a shopping list prior to going to the store (and) checking your cable television package and thinking about how many hours you watch of the channels that are only available on your tier.”
A larger change he recommends: “Call your credit card companies and ask if they can reduce your interest rate. With a good payment history some card issuers will rather give you a reduced interest rate rather than you transfer your balance to another card. The worse that can happen is they say no.”
Catania urges consumers to research purchases before pulling the trigger on them. But he includes this warning: “Googling something isn’t research.” He explains that Google and other search engines accept paid advertisements that can look similar to other search results – and may not lead to the best prices. “Instead,” he says, “search for price calendars and empirical data from trusted sites like Consumer Reports to evaluate the best time to make a purchase.”
Lauren Z. Haynes, a certified financial planner in Midlothian, Va., agrees that every step doesn’t have to be big. “My number one tip for a realistic New Year’s Resolution is to choose to go out to eat only once a week (including lunch),” she says “This resolution is great because it’s actually helps in two areas- health and wealth. You save money by eating food at home and you probably will eat healthier as well!”
Automating actions can help with keeping resolutions
Leonard Raskin of Hunt Valley, Md.-based Raskin Global, knows changing habits is difficult. “I think realistic financial resolutions are hard for people to make and even harder to keep.” Among steps he recommends are the following:
- Pay down nondeductible debt.
- Save more of any pay increase that you get this year.
- Learn about 1 financial product or strategy that you didn’t know before.”
One key to keeping the momentum once you start saving is to automate the process. Many experts recommend removing temptation to spend. One way is to set an automatic draft each month to move money – the amount you haven’t been spending – from your checking to your savings. This reduces the chances of spending and increases the chance the resolution will last. You can also automate things such as increasing your 401(k) contribution.
Resolutions often are broken because they don’t include a plan or a list of tasks in order to achieve them. The solution is to set reasonable financial goals and to focus on the tasks and not the goal or resolution itself. Also, begin to change your behavior by educating yourself on the areas where you are weak. Finally, don’t just concentrate on what you spend. Look at your income and how to increase it. This will get you on your way to sticking with the tactics that will keep you from having to make another resolution again.