January is my favorite time of year.
It’s all about a second chance and a fresh beginning — what’s bad about that? It’s so motivating to feel like you can finally leave the past behind and become a new, better, happier, and richer person. It’s a great time to start a budget and set some aspirational finance goals.
I’m finally going to pay off the student loans! Save a down payment on a house! Start a budget and stick to it!
Many of us will start off hard, like with a no-spend January or a free trial of new software like YNAB. But a couple of weeks pass, the motivation fades, and old habits die hard. Pretty soon you’re back on your favorite food delivery app wondering, how did I get back here?
Let’s break the cycle! Here are a few ways to set a financial New Year’s resolution and keep it.
1. Find your why.
Look, we all want more money in our pockets. But why? What would that money mean to you?
One of my goals is to save more for retirement. If you ask me why, I’d probably say, “I don’t know, I’m trying to be responsible.” But I kept asking why.
The truth is, money was scarce in my household growing up. I didn’t have a safety net. Saving for retirement gives me a sense of safety that I never had before, and that’s something that’s really important to me. So my why is that I’m building a sense of safety for myself and my family.
Maybe you want to pay off debt this year. Why? It might be so that you can improve your credit score, so you will qualify for a loan, that will help you buy a home for your growing family, and a home means security.
Knowing my why keeps me on track.
Sometimes I’m browsing a certain online shopping site with primo two-day shipping and my cart is full of things that are nice to have but not needed. What stops me from clicking that checkout button is knowing that I have bigger goals that I want to achieve, like taking care of my loved ones or my future self.
Chase down your why. Keep asking yourself over and over again, why is this important to me?
Knowing your why will help you set goals that you love and gives you that extra boost when your motivation wanes.
2. Be specific.
Now that we know what we really want, let’s be specific about how we’re gonna get there.
“I want to save money” is an okay resolution. “I want to save $5,000 in 12 months” is even better.
Being specific helps us break big scary goals into smaller, more manageable sizes. It helps us create progress markers that let us know that we’re making progress.
|Resolutions that are alright, I guess||Resolutions that are way better|
|Pay down debt.||Pay down $10,000 of credit card debt in 12 months.|
|Save more for retirement.||Max out the $6000 IRA limit this year by December.|
|Start budgeting.||Create a zero-based budget routine where I check it every day and review transactions once a week.|
|Spend less.||Reduce monthly dining out expenses from $500/mo to $300/mo.|
|Give more to charity.||Choose a charity to donate $100 to every month|
As the saying goes, what gets measured gets improved. Find something realistic and don’t be afraid to start small. Small is good.
3. Break it down.
Paying off $10,000 of debt this year sounds like a lot. Just looking at a number like that might make you want to give up. Let’s break it down so it’s less scary.
$10,000 in a year is about $834 a month. That’s approximately $200 a week, or about 30 bucks a day. Saving this amount feels way more doable than before.
And if it’s still too much, don’t forget that your goal can change. Sometimes you break down your savings goal to realize that your goal might be unrealistic right now. That’s okay. Change your goal to something achievable and set yourself up for success.
4. Create systems to support you.
Sometimes it feels like we’re our own biggest enemy when it comes to achieving our New Years’ resolutions. You’ve been doing so well avoiding the shopping mall but then an ad pops up on your social media and you really, really want the thing. So you buy it, and for a moment you feel so happy, and an instant later, you feel guilty.
How can we save our goals from ourselves?
Great news, we don’t have to do this on willpower alone. After all, we live in an age of the internet! There are countless tools to help us build systems that create results without any effort.
My number one favorite? Automatic transfers.
If you’re saving in a pre-tax retirement account like a 401k, you might already be familiar with this idea. The money is saved way before you’re even paid, like magic. Even though you’re not doing anything, the system puts that money aside and pays you whatever is left.
You can take this a step further. If your company offers a way to split your direct deposit into different accounts, you can set up your paycheck so that your Roth IRA gets a few hundred bucks first, and the remaining amount goes into my checking. You’ll never even see that money.
Another great way to systemize your success is to create an environment of accountability. Get a budgeting buddy to check in with once a week. Hire a finance coach.
Let’s do this.
New Years’ resolutions can be tough to keep. But we can make it easier if we focus on our why, make the goals specific, break it down into small baby steps, and create systems for success. What are your resolutions for the New Year, financial or otherwise? Share them with us in the comments below!