Every new year, people tend to make resolutions. These resolutions are always well-intentioned, many times, they are financial. Here are a few common ones that I’ve heard so far in 2018:
- I want to get out of debt.
- I want to build my savings.
- I want to save for [insert something specific – a vacation, a house, a new car].
- I want to get better about budgeting.
- I want to start my own business.
- I want to create a “side hustle” to earn an extra stream of income.
These are all phenomenal goals to set! Unfortunately, not all of them are easy to achieve.
New Year’s Resolutions Fizzle
This isn’t always true. That being said, it’s fairly common for people to give up on their New Year’s resolutions. In fact, 80% of all New Year’s resolutions are abandoned by February – that means we’re only serious about achieving our positive, life changing goals for about a month.
This has nothing to do with your character, or with how determined you are to stick with positive changes you’re making in your life. In all likelihood, you’re incredibly motivated to accomplish your goals. After all, you had enough motivation to brainstorm them, think on them, and commit – right?
We tend to fall down for one simple reason: our New Year’s resolutions aren’t rooted in anything. They’re broad, sweeping declarations that, while positive, aren’t necessarily based in any specific reasoning. Maybe you’ve decided you want to get out of debt because you know that paying hundreds or thousands of dollars each month toward student loans and credit cards is making you miserable.
But saying simply, “I want to get out of debt,” isn’t enough. The goal is too general. Without a clear idea of why you want to pay down your debt, and a distinct plan to get it done, you’re less likely to follow through.
Finding Your Why
When you make a list of New Year’s resolutions this year, I suggest digging a little deeper. Peel back the layers of your goals – why are they important to you?
Why do you want to get out of debt?
Why do you want to budget?
Why do you want to save more money?
Why do you want to get a new job, start a business, or create a side hustle?
Maybe you want to get out of debt so you free up extra cash flow and can start saving for a house. Maybe you want to get a new job because you don’t feel your benefits and pay reflect your expertise. Maybe you want to create a “side hustle” to fund your love of travel.
These are all valid “why’s” – and knowing them helps hold you accountable when working to achieve your goals. Go ahead and write them down. Sometimes seeing it on paper in your own handwriting and having a hard copy of things that motivate you is enough to push you through times when it’s hard to stick with your resolutions.
Set Attainable Goals
Another reason many New Year’s resolutions are abandoned is because the goals we set are unreachable. If paying off debt is a goal for you, that’s wonderful. But if you have $50,000 in student loans, you may not be able to pay them all off right now.
While having big picture, long-term goals is a good way to look ahead and keep moving toward positive financial life changes, they can also be disheartening if you expect to achieve them right now. I say – go ahead and write down these goals. They’re meaningful, too. But don’t stop there.
Instead, push through. Once you have your big picture goals, and the reasons why you want to work toward them, create an action plan. These are also known as micro goals. Setting micro goals means creating smaller, more achievable goals that lead to your big picture goal. These micro goals can be achieved each day, month, or year. Think of them as baby steps in your action plan.
Micro goals work wonders for your motivation. You quickly start feeling more motivated as you knock them off your list. Sticking with our “paying off debt” financial resolution example, your goals might look like this:
Big Picture Goal: Pay off all debt.
Why?: Being in debt is hindering me from achieving other goals, like travelling, saving for retirement, and making big purchases – like a house and a car. I feel bad when I’m in debt, and I’d like to improve my financial life and credit score.
- Create a list of all my debts and loans.
- Organize list in order from highest interest to lowest interest.
- Decide whether I have the cash on hand to pay off some of my smaller debts to free up cash flow.
- Start contributing $50 extra a month toward the highest interest loan to pay it down faster.
These are just a few of the micro goals you might consider setting that will move you toward paying down your debt. They’re easy to implement, and still help you start making positive financial life changes.
Whatever your financial resolutions are in 2018, it’s helpful to have a financial planner on your side to help you set achievable goals and hold you accountable. If you’re interested in having an honest conversation about your goals, I’m always here to talk. Schedule a meeting today by clicking here.