How to Make Your Financial New Year's Resolution a Success
(If you'd rather listen to this post on my podcast, click HERE. Look for episode #17.)
Has there ever been a new year more eagerly anticipated than 2021? Maybe the year 2000. That was a pretty big deal. I also remember, however, that everyone was worried that everything with a computer in it would blow up at the stroke of midnight. So, mixed with great excitement was a bit of apprehension as well.
Moving on from 2020 though? I think we’re all ready.
And accompanying the start of 2021 will be a New Year’s resolution for approximately half of all American adults, according to westernconnecticuthealthnetwork.org. Unfortunately, it is believed that over 90% of Americans fail to keep their New Year’s resolution for more than a couple months.
If you plan to make a New Year’s resolution to improve your finances, here are some strategies you can use to be successful.
First, your goal should be specific. If your goal isn’t specific, you probably won’t even know how to accomplish your goal.
“I will be more financially responsible in 2021” isn’t a very specific goal. If someone told me this was their goal, I wouldn’t really know what they meant. Are they going to start budgeting? Are they going to pay every single bill on time? Maybe they want to start saving for their kids’ college expenses.
Who knows? A vague financial goal likely won’t get the results you’re intending.
Second, make sure your financial goal can be achieved in a 12-month time frame. We are talking about resolutions for 2021, after all, not resolutions for the next decade.
Saying you want to save one million dollars for retirement is a worthy goal, but you can’t do that in one year. Likewise with paying off the remaining $224,000 on your mortgage, credit card, and car loan.
You can still concentrate on the large goals, however. Let’s take the $224,000 debt, for example. Since you can’t pay that off in one year, just concentrate on part of it.
Let’s say you’ve got $11,000 left on the car loan, and you’re scheduled to pay it off in 48 months. Bankrate’s car loan calculator says you’d pay approximately $243 each month. You’d like to pay it off a full year early, however. In order to do that, you’d have to pay an extra $80/month. After examining your budget, you determine that you can afford that.
So now your New Year’s resolution is, “I will pay an extra $960 on my car loan this year.” This resolution is specific and completely doable in one year.
Third, your resolution must be measurable. If your resolution isn’t measurable, you won’t be able to tell if you’re meeting your goal or not.
Paying an extra $960 on the car loan in one year definitely is measurable. You’d just need to check your checking account and car loan statement every month to make sure you are indeed paying an extra $80 on it every month.
Examples of other possible financial goals for the new year that are specific, achievable within one year, and measurable are: “I will meet with my spouse on the last day of each month to plan our budget for the next month”, “We will spend no more than X amount of dollars at restaurants each month”, “I will donate X percentage of my paycheck to church/charity”, and “I will open a retirement account and invest X amount of money every month”.
Your resolution doesn’t have to be one of those, of course. There is a myriad of other financial goals you could set for next year.
Making a financial New Year’s resolution for 2021 is a great move. Just make sure your it is specific, achievable within one year, and measurable. You can do it!