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New Year's Resolutions

New Year’s Resolutions Your Wallet Will Thank You For

This time of year, the internet is flooded with information about setting (and sticking to) New Year’s Resolutions. Here’s the thing, and I know this isn’t a popular opinion, but I don’t like resolutions.

In my line of work as a financial planner, I see a lot of people set out to achieve some pretty lofty financially-rooted New Year’s resolutions. Then, when they start to backslide in February or March, they give up completely. This trend is incredibly disheartening for me. All I want is for clients to find financial success, and I find that the pressure people feel to set big goals tends to burn people out more often than not.

I don’t want you to think I’m 100% against goal setting, though! I strongly believe that setting goals and working toward them in bite-sized chunks can be life-changing. Let’s break down why I think that traditional resolution setting might not be your best bet, and what I like to see clients pursue instead.

Why I Don’t Like Resolutions

There are a few scientifically proven cases against resolutions. The one that really hits me is that picking a small action and implementing it until it’s habit is the best way to create change in your life. Resolutions are almost never based on small actions. They’re big-picture. Think carefully about resolutions you’ve set in the past:

  • You want to get healthy.
  • You want to reconnect with family and friends.
  • You want to save more.
  • You want to read more.

The way I see it, there are two problems with these goals. First and foremost, they’re too big-picture. These goals could take dozens of micro-goals to achieve. You don’t lose 30 pounds and start running marathons overnight. You also don’t achieve big money goals all at once. These goals are better viewed as processes – with several small goals put in place to get you to your ultimate goal.

Second, typical resolutions are too general. “Getting healthy” or “saving more” aren’t very specific goals to pursue this year. Instead, I like to see people set more specific goals when it comes to their money. The more clear you can get, the better! It’s so much easier to put together a plan when you know exactly what you’re working toward.

Audit Your Previous Year

Instead of setting big, intimidating, money-related resolutions for this year, slow down and take a step back. Before you dive into a life-changing resolution, start by auditing your previous year’s finances. When you’re able to take an honest look at last year’s finances, you can make note of what worked – and what didn’t.

It’s really important not to judge yourself throughout this process. Even if you feel like you overspent last year, or didn’t pay down your debt as planned, or dipped into your emergency savings when you probably shouldn’t have – don’t look at these slip-up’s and then continue to beat yourself up! The point of this exercise is to keep working toward improvement, not to drag yourself through the mud. Once you know what hurdles you faced last year, and what financial strategies worked, you can get started setting new goals for this year.

Break Goals Down

What do you want to accomplish this year?

When we set goals, it’s easy to brainstorm the big-picture ideas. That’s why New Year’s Resolutions are so popular! So, let’s start there. Be as general as you want to be. Let’s take an easy example – building your savings.

Once you have your general goal, you can start to break it down into smaller, bite-sized goals. In this example, you might say:

  • I want to have 3 months of expenses saved in an emergency savings account.
  • I want to start contributing 6% of my pre-tax salary to my 401(k).
  • I want to put $2,000 aside for a vacation by mid-August.

Those are three very clear goals to strive for this year – and they all fall under the broader category of “saving.”

Break Out the Calendar

I’m a big believer in the idea that, unless something makes it onto your calendar, it’s not going to happen. In today’s busy world, there’s not enough time to fit in “extra” activities. If something is a priority, we have to block out time for it in advance. Taking our previous example of growing your savings this year, you could take a few steps to make space for saving in your calendar:

  • Set a monthly meeting with your spouse or partner to go over your budget to stay on track with your savings goals.
  • Block out 30 minutes next week to set up automated contributions to your 401(k) at work.
  • If you’re doing any extra work to put money toward a vacation or another big savings goal, pencil in when you’re going to accomplish that! Whether you want to take on extra hours at work, start a blog, or start renting out your spare room on AirBnB – you need to decide when you’ll have time outside of work to work toward that goal.

Automate What You Can

Whenever you can, automate your financial goals. Automation is the biggest time saver you have on your side when it comes to financial planning. This is especially true for my physician clients who know what they want to do, but don’t have the time every day to do it.

If you want to save more, set up automated contributions to your savings account every payday. If you want to pay down your debt more quickly, set up automated, extra payments each month or quarter in addition to your monthly payments. Whenever we can automate a portion of your finances, we take the human element out of the mix. This helps us to avoid mistakes or missteps, or even just poor decision making in a moment of weakness.

Ask For Help

One of the easiest ways to stay on track as you move toward your money goals this year is to ask for help. Working with a financial planner can help you to organize your goals, create a strategy, and execute your gameplan. Want to learn more? Contact us today! I’d love to chat with you about what you want to accomplish this year.