As we jump into the New Year, financial resolutions often top the list when looking to improve our lives. However, maintaining the momentum and commitment to these goals throughout the year can be challenging, especially with the state of the economy, an unstable job market and other factors that effect our daily spending habits. Each year, I always find myself getting really ambitious when setting money goals. But after taking a step back, I review each of my resolutions, and create a solution on how to stick with each of my financial goals. Here, I’ll share seven practical tips to help individuals stick with their financial New Year’s resolutions.
New Year’s Resolutions: How to Stick with and Achieve Financial Goals
Set Clear and Realistic Goals. The foundation of any successful resolution lies in setting clear, specific, and achievable goals. Rather than generic aspirations like “save more money” or “spend less,” define your objectives with precision. For instance, aim to save a specific percentage of your income, pay off a certain amount of debt, or create an emergency fund. Realistic goals increase the likelihood of success and provide a roadmap for your financial journey.
One year, I had to be very honest with myself when managing credit card debt. I wanted to pay it off asap, however, I had to be smart with how much I put towards my debt, emergency savings, and other expenses. It took a lot of discipline, but I put together a realistic percentage of how much I could put towards my credit cards each month, allowing me to afford my other bills while growing my savings account.
Create a Budget. A budget is a powerful tool for managing your finances and achieving your goals. Start by tracking your income and expenses to identify spending patterns. Allocate funds to essential categories like bills, savings, and debt repayment. Having a well-organized budget allows you to make informed financial decisions, ensuring that you stay on track with your resolutions.
Automate Savings and Payments. Automating your savings and bill payments is an effective way to ensure consistency. Set up automatic transfers to your savings account and schedule payments for bills. This eliminates the risk of forgetting or procrastinating, making it easier to adhere to your financial plan. Automation simplifies the process, turning positive financial habits into second nature.
Today, I still pick and chose which bill payments I automate. One item I always automate is the deposit that goes into my retirement account. By having funds withdrawn from my paycheck automatically, I don’t feel the ‘pain’ as much, versus having to withdraw it myself.
Regularly Review and Adjust. Financial situations can change, and it’s crucial to adapt your plan accordingly. Regularly review your budget, assess your progress, and make necessary adjustments. Life is dynamic, and your financial goals should evolve with your circumstances. Being flexible and willing to modify your approach will contribute to long-term success.
I’ve experienced often- our financial situation changes year to year, so we’ve had to be flexible and roll with the financial punches. Some years we’ve had to shell out money for emergency expenses, car repairs, doctor visits, home repairs, etc. Being flexible has helped us pivot and adjust quickly so we don’t get affected by a financial setback.
Cultivate Accountability. Share your financial resolutions with a trusted friend, family member, or partner who can provide support and encouragement. Accountability is a powerful motivator. Having someone to share successes and challenges with not only makes the journey more enjoyable but also reinforces your commitment to your financial goals. Having Kurt as my financial partner in crime has helped tremendously in keeping me accountable. He helps remind us of our goals, helps us approach situations objectively, and reminds me how important it is to celebrate financial milestones.
Educate Yourself. Financial literacy is a key component of successful money management. Take the time to educate yourself on personal finance topics such as investing, budgeting strategies, and debt reduction. The more you understand about your financial landscape, the better equipped you’ll be to make informed decisions and stay committed to your resolutions.
There is always something I can learn or teach myself. Below are a few topics I’ve educated myself already, along with a few that I constantly read up on:
- Budgeting: Understanding how to create and stick to a budget is fundamental to managing your finances. It involves tracking income, categorizing expenses, and allocating funds to various needs and goals.
- Saving and Investing: Learning about different savings and investment options, such as savings accounts, certificates of deposit (CDs), stocks, bonds, and retirement accounts, can help individuals grow their wealth over time.
- Credit Management: Knowledge about credit scores, how they are calculated, and the impact they have on borrowing opportunities is essential. Additionally, understanding the responsible use of credit cards and loans can prevent debt-related issues.
- Debt Management: Understanding the different types of debt, such as credit card debt, student loans, and mortgages, and developing strategies for debt repayment is crucial for financial health.
- Retirement Planning: Learning about retirement savings vehicles, like 401(k)s and IRAs, and understanding the importance of starting to save for retirement early in one’s career can have a significant impact on future financial security.
- Insurance: Understanding various types of insurance, including health insurance, life insurance, and property insurance, is crucial for protecting oneself and loved ones from unexpected financial hardships.
- Taxes: Basic knowledge of the tax system, including how to file taxes, understanding deductions and credits, and planning for tax liabilities, is important for managing one’s overall financial situation.
- Estate Planning: Learning about estate planning involves understanding how to manage and distribute assets in the event of illness, disability, or death. This includes creating a will, establishing trusts, and designating beneficiaries.
- Financial Goal Setting: Developing the skill of setting realistic and achievable financial goals is crucial for creating a roadmap toward financial success. This includes short-term goals (e.g., saving for a vacation) and long-term goals (e.g., buying a home or funding a child’s education).
- Consumer Rights and Responsibilities: Understanding consumer rights and responsibilities, including reading financial agreements, contracts, and understanding financial regulations, can help individuals make informed decisions and protect themselves in various financial transactions.
- Emergency Fund Planning: Creating and maintaining an emergency fund is a key aspect of financial stability. Knowing how much to save and when to use these funds can be essential during unexpected financial challenges.
Celebrate Milestones. Acknowledge and celebrate your achievements along the way. Whether it’s reaching a savings milestone, paying off a credit card, or sticking to your budget for a consecutive number of months, recognizing your progress reinforces positive behavior. Treat yourself in moderation, and use these moments of celebration to fuel your motivation for the next financial milestone. Like I said earlier, it’s so important to celebrate small and big financial wins. You don’t have to spend a lot of money to celebrate your milestones- a nice dinner, a movie, or a spa treatment are great ways to treat yourself after you’ve accomplished a goal.
Sticking with financial New Year’s resolutions requires dedication, consistency, and a strategic approach. By being realistic and having a process, you can significantly increase your chances of achieving financial success in the coming year. Remember: your financial journey may look like a marathon, not a sprint. Small, consistent steps lead to lasting positive change and can help you get one step closer to building wealth.