This time of the year tends to make us reflective. We look back and assess what we’ve done well and what we’d like to change as we move forward. The clean break of the New Year gives us a great opportunity to make new goals for our personal lives, careers, and our finances. Out with the old and in with the new. We always have the best intentions for our New Year’s resolutions, but very few people have kept their resolutions by the time summer rolls around. If you’re one of the many who plan to include financial goals in their aspirations for the New Year, how do you stick to this type of resolution?
Make Your Goals Attainable
I hate to be the bearer of bad news, but for most people “I want to be a financially independent by 2018” is just not a realistic goal. Aim for something that you can actually achieve, like zero credit card debt, a hefty chunk of savings, or a well-invested sum of money. Don’t set yourself up for failure. Go ahead and make big, long-terms, but you have to start somewhere. Remember to make your goals SMART: specific, measurable, achievable, realistic, and time-bound.
The first step in setting a budget is to review all of your spending from the previous six months – any expenditures should be categorized into necessary and unnecessary. Some of your expenses can’t be changed, such as your rent or mortgage, but there are many line items that can easily increase if you don’t set limits on yourself. Just like with goals, you want to make sure that your budget is realistic, or you’ll just end up going over budget and feeling discouraged.
Going forward, keep track of all spending to ensure you’re not going over budget. You just need to sit down and assess your financial situation at least once per month, to ensure everything still adds up and your spending is in line with your predictions. If you can do this, you will be much more likely to keep your financial resolutions. Regular spending check-ups will help prevent spending from getting out of control. And, having specific goals will allow you to track your progress.
For the past couple of years, we haven’t really budgeted or done any type of regular review of spending. Instead, the goal was just to spend as little as possible and cut every expense possible. Our financial resolutions are still being worked on, but one thing we want to change is to do more tracking of our money goals in 2017. I’m working on a whole post outlining how we plan to regularly assess our financial status in the New Year.
Maximize Saving & Earn More
Every time you overspend on something, consider it as money taken out of your savings. If it’s a treat that you really want, you may have even considered spending your savings on it anyway. If you wouldn’t consider wasting saved money on a purchase, it’s probably not as much of a treat as you thought it was. After Christmas is a great time to get started on your savings. Sell your unwanted gifts and gift cards, to get that first chunk of extra money. Use it to pay off debt or to add to a savings account and start earning interest. Once you see how well you can do with a little bit of extra cash, you’ll want to start adding to it in no time. You’ll be inspired to start looking for new ways to earn some extra money.
Set yourself periodic goals and don’t forget about them. The whole time you’re building momentum, adjusting your attitude, and creating new habits for yourself. You’ll take pride in these achievements. And you need to congratulate yourself for sticking to a new lifestyle, cutting back your spending, and reaching your goals. If you set time-based financial targets, such as “I would like to have $500 in my savings by May 1st” and you hit your target, you should find a way to celebrate it (without spending money). Improving your finances can be difficult – it requires a complete change of attitude towards spending and a whole lot of self-awareness – so you need to acknowledge when you’re doing well.
Keep On Readjusting
Sometimes things don’t go so well. You might slip up and overspend on something, you might fail to keep your accounts up to date for a couple of months, or something unexpected might come up. Don’t beat yourself up. Be realistic about it. Sometimes things go wrong and sometimes we have a lapse in judgment. We’re only human after all. The important thing is that you’re regularly checking up on finances, so you know if you’re headed in the wrong direction. Just readjust your goals, spend some time getting your accounts in order, and then get back on track. If it helps, use the start of the next month as your new January 1st.
Just Remember: Never Give Up
Nobody is pretending that getting started on a new financial path isn’t difficult, but I can assure you that it gets easier over time. You have to change your entire attitude towards money and personal finances, and there will be times where you question your sanity for even making this resolution in the first place. There will be tough times and you may be tempted to hop back on the more-traditional path. But never forget your end goal. Picture the security and comfort that comes with being financially stable, and imagine all the wonderful freedom that you will have in the future – so much more valuable than material possessions. Always look ahead, don’t beat yourself up when things don’t quite go right, and just keep aiming for your next goal and realize that even small gains will help improve your financial outlook.