Resolutions are top-of-mind now as we flip the calendar page to the New Year, but many of us hesitate to make them because we are so bad at keeping them.
There are people who actually study New Year’s Resolutions for popularity and success. A quick internet search will yield several examples and they all tend to rank personal financial resolutions high, just behind health-related resolutions. The top two financial resolutions are usually some form of “Save more/spend less” and “Reduce debt.” “Lose weight,” “Get fit/healthy,” and “Stop smoking” are the top health-related resolutions.
For 2016, the personal finance website gobankingrates.com surveyed 5,000 people with a multiple-choice selection of six resolutions. They included a hopelessly broad resolution of “Enjoy life to the fullest.” That’s not a resolution, in my opinion, but a byproduct of all the other choices you make in life, coupled with the circumstances you are dealt. I’m not surprised it was the top choice among the six resolutions listed at 47.5 percent. After all, who would not want to “Enjoy life to the fullest?”
The problem is not with the sentiment; the problem is finding actionable steps to make it happen. The other five choices were, in order of popularity:
It is worth noting that at least one of the two financial choices, “Save more, spend less” and “Pay down debt” showed up in 57.6 percent of the respondents’ choices. Combined, that total exceeds “Enjoy life to the fullest.” You can read the entire report here.
I’m not here to tell you that getting a better handle on your finances will magically make you “Enjoy life to the fullest.” But I believe that in most cases, getting a handle on your financial life often brings more confidence. One of my mantras is, “Money can’t buy you happiness, but it can buy you choices.” Having choices is often a key to finding happiness.
Call them personal finance goals or financial resolutions; I don’t think the semantics matter that much. The key is to come up with something you can and will act upon. Then, when 2017 ends, you can look back and see that you moved forward.
Instead of “save more, spend less,” let’s try something like, “Cut spending by $500 per month and then save that $500 per month.” If you find out three months in that your $500 goal is not achievable, adjust the goal and move forward. At least you had a target you tried to hit. Adjust the target and work to hit the new one rather than beating yourself up over missing the original one, and quitting the entire effort. At the end of the year you can celebrate a success.
Again, make this specific, such as “Reduce my debt by $225 per month.” It is difficult to get ahead when every spare dime you earn is spent to keep up with debt. The quicker you can cut debt, the quicker you can accelerate saving. Use a debt calculator to look at “what if” scenarios for paying down debt. CNN Money has one free example here, but there are many others to be found.
The specifics here: Find a budgeting tool, plug in numbers to see where your money goes, then cut out as much of the superfluous as you can. Often, just making yourself aware of where your money goes can help you get a handle on spending. As in the debt calculators, there are plenty of online options for budgeting. One of the most popular is Intuit’s Mint.
To make this specific, commit to a monthly dollar amount. Tips #2 and #3 should set you up well for this one. For example, you can say, “Cut $50 off my grocery bill, cut $75 off my bill for dining out, and cut $100 off my happy hour tab.”
Also, look at opportunities for “free” money. If your employer has a retirement plan with a matching contribution, I encourage contributing at least the amount required to get the employer match. Also, look at the possible tax savings of making an IRA contribution, or increasing the contribution above what you planned. You have until the tax filing deadline, April 18th 2017, to make that contribution for the 2016 calendar year. Check with your tax advisor to determine if there is an advantage for you.
Baby Boomers are notorious do-it-yourselfers who like to tough it out and go-it-alone. It is a wonderful attribute, but remember, you can’t be an expert in everything. Often we accomplish more when we ask for help. It can be prudent, and not a sign of weakness. A written plan – no matter who prepares it – is essential. Keep a copy where you can review it regularly to keep it top-of-mind.
Add some specifics to your resolutions this year, keep reminder tools in front of you, and 2017 could be a turnaround year for your resolutions and your finances.
Erin Botsford – Botsford Financial Group
Securities offered through LPL Financial, Member FINRA/SIPC. Financial Planning offered through Lifestyle Planning Solutions, a registered investment advisor. Investment advice offered through Stratos Wealth Partners, a registered investment advisor. Botsford Financial Group, Lifestyle Planning Solutions and Stratos Wealth Partners are separate entities from LPL Financial.
For a list of states in which I am registered to do business, please visit www.botsfordfinancial.com.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for any individual.