The new year is here! Usually that means being excited about the new beginning and setting goals to improve our lives. Very often New Year’s resolutions revolve around physical health but a large percentage of resolutions relate to personal finance. Getting out of debt, reducing expenses or increasing savings are some of the most common goals. And while setting goals is easy, most people find it difficult to stick to their resolutions and end up abandoning their goals within the first couple of months of the year.
So what can you do to stick to your resolutions?
First, give yourself credit. Before you start thinking about what your financial goals for 2013 are, take the time to acknowledge what you accomplished in 2012. Evaluating your financial accomplishments from the past year will help motivate you and make it easier for you to move forward towards your new goals.
Be realistic. Just like with any goal, you need a certain dose of realism to succeed. You can always make a resolution to save $1,000 a month but if all you can manage to save, even after cutting expenses to bare minimum is $700, you are better off aiming at a realistic target. Otherwise you are setting yourself up for failure.
Be accountable. Whether it is to your spouse, significant other, or just a friend, you will find yourself feeling more motivated to stick to your goals if you have shared them and if you communicate how you are doing.
Start small. If your goal is to reduce discretionary expenses, do not try to stop eating out altogether. Instead start by eating out only once a week and progressively reduce the number of times you eat out even further.
Beware of budgets. Yes you read this right. Whether your goal is to save more, pay off debt or increase your retirement contributions, chances are you will have to take a hard look at your income and expenses equation. Very often you will reach the conclusion that you can succeed by setting a budget. But budgets are too restrictive and very often do more harm than good. (See What do diets and budgets have in common?). Instead, create a spending plan, focus on tracking expenses and use your past spending habits to understand your financial behaviors. Then determine what aspects you can improve and how.
And finally, the best tools are within you. With the right mix of determination, patience, resilience, and adaptability you will stick to your financial new year’s resolutions and may even surprise yourself with what you can achieve.