Resolutions to Improve Your Financial Health in The New Year
The New Year is a time to reflect on the past and set resolutions for the upcoming year. January 1st brings a fresh start and the chance to try again. You get a “do over” for the thing you keep telling yourself you want to accomplish. This start date can motivate you to action, when other attempts have failed.
Most New Year Resolutions fall into one of three categories:
- Health: To live a healthier life. Goals might include losing weight, eating healthier, exercising more, quitting smoking, or drinking less.
- Personal: Enjoy life more. Goals might include spending more time with family, traveling more, reducing stress, or volunteering.
- Financial: Have more money and increase financial security. Goals might include saving more, reducing debt, or spending less.
The top three financial goals reported are reducing debt, saving more, and spending less. Joined together, these three goals create greater financial success. When spending is reduced, you have more money to pay down debt or set aside for savings. Reducing debt frees up monthly payments that can be used to fund other long term financial goals, such as retirement or your children’s college.
So while New Year’s resolutions get a lot of bad press, and focus on the high rate of failure, you can learn to make them work for you. When structured properly, resolutions can become a guide for greater and faster financial success. Sort of like a business plan for your personal life.
8 Things You Can Do Today to Reach Your New Year’s Resolutions and Improve Your Financial Health:
- Resolutions Provide Motivation. This is the time of year where you are given permission to imagine your life as you want it to be. What would your life look like if you actually accomplished your financial goals? What does freedom from debt feel like? That vacation you have always wanted? Knowing you are on track for retirement? Keeping resolutions front and center will help you stay motivated and focused on long term goals you have set for yourself.
- Measure Success. Without a process in place you are less likely to reach your goals because daily habits have not been created that are consistent with your goals. For example: if you want to be debt free, but find yourself with increasing credit balances, you are not moving forward. Without a process in place to reduce debt, it will never magically go away, just because you want to be debt free. One of the challenges with long term goals is seeing progress and movement. To counter this, set goals that are actionable (specific task oriented), measurable (you can see movement), and timely (set a deadline). You will then be able to see progress even when it’s slow, enabling you to celebrate successes and stay motivated for long term changes.
- Simplify Long Term Goals by breaking them down into daily or weekly tasks. This step will help you develop habits and behavior patterns that move you, consistently, in the right direction. For example: If you set a goal to pay off $40,000 worth of debt, this will not happen overnight. The resolution is “I want to be debt free.” The goals will be to set aside specific amounts, each pay period, which will bring you closer to the goal. This might mean adding an extra payment to one bill or adding a small additional amount to a debt payment each week. These small steps will lead to big results at the end of the year as long as you are consistent.
- Automate The Process. When you have to think about a financial decision it is easy to talk yourself out of it. You tell yourself, “I know I should put money in savings but XYZ has come up.” This demand for your dollar is best combated through automation. When you don’t see it, you don’t consider it for other spending. The more automated your process is, the more likely you are to succeed. If you want to pay down debt, for example, look at the 3-year payoff on your statement and set the bill pay on automates payments for that amount. Then you never have to think about it. There will be no late charges and the debt will pay off on schedule, as long as you don’t re-adjust the payments.
- Make Small, Measurable Changes. One key reason for the high failure rate regarding resolutions is that we envision the end of the road. Then we try and make radical changes to get there in lightning speed. The result is that we don’t move at all, because it feels too hard. Starting from exactly where you are and taking small steps will ultimately get you there faster. You don’t go from a couch potato to running a marathon in one week. You start by walking one mile, then running a mile and build up to the end goal. Take this same approach with all your goals and you will reach greater success.
- Focus On the Positive. One thing about failure it that it breeds discouragement and leads to quitting. You really can accomplish any goal you set, if you stick with it. Woody Allen famously said, “99 percent of life is showing up.” This principle can be applied to goals. Set small measurable changes and then do it every day, until it becomes part of your routine and way of living.
- Adjust as Life Happens. Life is fluid and dynamic and the unexpected always happens. When changes in your circumstances occur adjust your resolutions rather than scrapping them. If you set aside $250 extra for debt reduction, and your spouse suddenly needs a new medicine that adds $100 a month to your costs, don’t’ get rid of the goal, just adjust it.
- Work with A Professional. Often the things we want the most are not achieved because they are too overwhelming. If this is the case, get help. There are professional providers in nearly every industry that can help access your current situation and present solutions for success. Find a company you trust and let them help you reach your financial goals.
Let this time of reflection be your opportunity to improve your financial health. Set goals for the new Year that will get you to where you want to be financially, one step at a time.