It is that time when we vow to do better in the coming year. Making New Year’s resolutions is a tradition and, according to Statistics Brain, almost half of us make them. Spending less or saving more money is the third most popular resolution behind losing weight and getting organized, but ahead of enjoying life and staying fit.
Unfortunately, only 8 percent of us are very successful at keeping resolutions. About three quarters of resolutions will survive the first week, but less than half will survive to mid year.
Why do we have so much trouble keeping our resolutions? Psychologists have a couple of theories. We may not be truly ready to change our behaviors. We live our lives largely on habit, and habits are hard to change. We also tend to set unrealistic goals, which can cause us to become discouraged and give up.
However there are ways to improve your odds. Let’s take my favorite resolution of saving more and spending less money. First if this is truly your goal, set aside all the others. You can lose weight after you’re saving like you want to be. Here is how to get started:
Set a specific goal. For saving money you can set a dollar amount per pay check that you will put aside or increase your retirement plan contributions at work by a specific percent of your pay.
Make your goal achievable. If you set a goal that is too difficult, you are more likely to give it up altogether than you are to go part way. Baby steps are OK. Even if you are behind where you should be in saving, you can start small, and increase your savings over time.
Commit to your goal. With saving money, there are lots of ways to take advantage of automation to insure you save what you want. Go to your benefits department at work, and increase your retirement plan contribution. Most employers will allow you to direct deposit your pay to more than one account. Have a portion of your pay automatically deposited into an individual retirement account. If you are working on your emergency fund, you can have part of your pay directed to a separate bank account. All of these options take the work out of your hands. Your money is set aside before you even see it, and all you have to do is resist retrieving it.
Have a plan. If you increase your savings, you will have to cut back on your spending. If your goal is small and you’ve taken advantage of automation, you may easily adapt to your new, after savings, pay. However, if your goal is bigger you may need to figure out specifically what you will cut back on. Look for things where you aren’t getting the value you thought you would. Perhaps you have a gym membership you aren’t using or premium cable channels you aren’t watching. Avoid completely cutting out things you do enjoy. You are less likely to stick with your plan if you have to give up things that are important to you.
Enlist others. Tell friends and family about your money saving goal. They can help you stay accountable to yourself, and they may be able to contribute to your goal by choosing lower cost ways to participate in activities that cost money. If you go out with friends, maybe a lower cost restaurant will be chosen. Or you might decide to gather at someone’s home potluck style. Dollar limits can be set for family gifts. If you talk about your goals, those close to you will find a way to help you achieve them.
Break your goals into smaller pieces. If you have an annual savings goal, break it down into a per week or per paycheck goal. Give yourself milestones, like an amount to have saved by the end of each calendar quarter. Celebrate your successes. You can even spend a little to do it.
Expect Setbacks. It may take a while for you to get in the habit of saving more money. Unexpected expenses or a moment of weakness can keep you from making your shorter term goals. These are temporary setbacks, and they are not reasons to abandon your goals. Review your plan, and make adjustments if necessary.
Saving money is hard. That is why so many have so little saved. But if you are serious about it, specific, achievable goals and a plan will help you keep your resolution. Even if you can’t save what you should be saving right away, starting small and gradually increasing your savings will go a long way toward creating your financial security.