Just having a New Year’s resolution can help your bank account, but most of the time, people fail.
If you have trouble keeping that overly-broad, year-long goal you thought of while participating in rowdy New Year’s Eve festivities, here’s some advice: Keep it simple. Keep it focused.
Having a goal doesn’t need to be complicated. It can be as simple as building an emergency fund or making a budget. If you’re trying to get out of debt or save money, check out these detailed tips on New Year’s resolutions below.
1. Exercise your mind.
Self-control isn’t limited to Victoria’s Secret models on a diet. And it’s like a muscle — the more you use it, the stronger it grows. So instead of impulse-buying a pair of jeans the next time you go shopping, make a list of what you need and stick to it before you go shopping.
It’s important to build muscle slowly, so make sure you do the same with your finances. Trying to quit bad spending habits cold turkey is like trying to resist a cupcake when you’re really hungry.
2. Be specific.
A New Year’s resolution is just like any goal. If you frame it in the right way, you’re more likely to succeed.
If you have a nebulous goal to “save more money” there’s nothing actionable built into the goal that you can make happen. It’s an admirable aim, but it’s not an actionable item. “More” could be anything. If you save one dollar, that may be one more than last year. But that’s probably not what you meant.
Instead, your goals need to be specific
So, “save more money” becomes “save $2,000 by August for a down payment on a new car.” You have an amount you want to save that you can set regular targets to hit. You also have a specific use for the money, so you’re not just saving because saving is what you’re supposed to do.
You’re more likely to keep this resolution, because you can measure your progress over time.
3. Set a budget.
Financial experts pretty much all agree that you should pay yourself first. Just as you set aside money for your monthly phone bill or utility bills, you should be setting aside money each month for your own future, too.
This starts with a budget. Calculate all your expenses and write them down. Then figure out where you can cut costs, and put that money toward your savings. But don’t rely on credit to fill in the gaps.
Even people who make a six-figure income struggle with being able to budget properly. But if you can set up a budget and stick to it, you won’t need credit cards or payday loans to get you through the end of the month.
4. Kick the habits that cost you most.
Gambling, smoking, and drinking: Your vices are expensive. You’ll improve your lifestyle, your health, and your wealth by quitting — so that’s a fine resolution of its own.
Food is another addiction that can be not only costly but unhealthy.
You’ve heard the saying, “Eat to live, not live to eat.” It just means you eat enough food to receive your daily nutrients, vitamins, and minerals, rather than eating to excess all the time.
Yeah, food tastes good. And it’s fun to spend money on stupid stuff that you don’t really need, but neither helps you further your goals in the long run, and both actually make you feel worse about yourself eventually.
5. Don’t pay for stuff you don’t use anymore.
Gym memberships, old magazine or newspaper subscriptions, and monthly streaming services like Spotify or Netflix should be canceled if you don’t use them. Even if you do, consider canceling them anyways. It’ll save you money and help you pay off debt quicker.
6. Vigilantly track spending.
It’s important to go over your finances constantly, but there’s no better time to start than with a fresh year. Review your income and where you’re spending your money.
“You don’t know what you have until it’s gone” applies to money, too. Being too scared to check your bank account activity is the best way to fail your New Year’s resolution. Use an app like Power Wallet or Mint for detailed breakdowns of where your cash is going.
7. Use cash whenever possible.
Study after study shows that people who use credit cards instead of cash spend more money. If you have cash in your hand, you’ll be more cautious about what you’re forking over, and you’re more likely to have a budget.
It’s like a hangover. If you go out to the bar without a plan, you’re going to end up hurting in the morning. The best way to avoid this is to plan out your night and what type of drinks you’ll have.
Same applies to spending. If you’re easily tempted, leave your credit card at home when you go shopping and bring cash.
8. Give yourself the gift of an emergency fund.
Your vehicle breaks down, you get demoted, your spouse loses their health insurance. Any of these can happen to anyone at any time, so experts recommend saving three to six months’ worth for expenses. That time period increases to six to 12 months in a recession, Bankrate says.
Here’s how to start saving:
- Determine what your emergency fund should be
- Decide how much you can save each month
- See if there are milestones you can make along the way
Let’s say you make $2,000 per month. Your emergency fund should be $6,000 to $12,000. Of course, that’s a pretty big amount to start with. So, you can set an early milestone along the way. An initial target of $1,000 may be more realistic. That would cover most emergency expenses, like car repairs, a broken water heater or an out-of-pocket medical bill.
Then, you need to figure out how much can be set aside each month. This gives you a monthly goal to reach, a way to measure your progress, and a specific use for the money.
9. Be realistic.
If you’ve ever been on a diet and had a doughnut at the office one day, you probably had an internal debate about whether you should just eat whatever you want to anyways since you already messed up.
It turns out, you shouldn’t. If you fall off your plan, start again as soon as you can, and don’t give up just because you made a mistake.
Whatever your resolution is, the best way to stay on track is to start small.
No, you will probably not lose 150 pounds this year, just like you probably won’t be able to pay off all your student loans.
But the short-term goals are just as important as the end goal — seeing success motivates you to keep going.
Cameren Boatner contributed to this report.
Updated on: July 21st, 2019