Ring in the Year With Financial Resolutions You Can Keep
NEW YORK (MainStreet) — Many of us made a lot of resolutions in ringing in the new year, including financial resolutions. Plans on how to keep them weren’t as common.
“People who make resolutions often do not reach their goals because they are attempting to make overwhelming changes,” says Shannon Cassidy, author of the newly released The Five Degree Principle: How Small Changes Lead to Big Results.
We talked with some financial experts about the most common financial goals people make and how to keep them:
Creating a budget: Possibly the most common financial goal people make is to create a budget. “Unfortunately, most people get excited for a week or month, after which they go back to their old habits,” says Liran Hirschkorn, an independent insurance broker. Hirschkorn says the best way to keep this resolution is to put pen to paper and get your budget in writing. “Don't put it off, or on some list. Do it now,” he says.
Paying off credit card debt: How many years has it been now that you’ve resolved to paying off your credit cards? Kelley Long, CPA and a spokeswoman-member for of the National CPA Financial Literacy Commission, says many people fail at this goal mainly because they don’t stop using the cards. To help you keep your goal, Long recommends putting it on a calendar such as the one at whatsthecost.com, which has a calculator on it that tells you your debt-free date.
Saving more money: If you haven’t been able to keep this resolution in the past, it could be you need a little help. Daryl Dagit, financial adviser with Savant Capital Management, says many people need to set up an automatic savings plan, even if it is just $5 per week taken from their check, to help get started.
Giving to charity: As with savings, a lot of people break this resolution because it falls last on the list after paying monthly expenses, paying down debt and even using funds for discretionary spending. “The way to make this resolution stick is to add a line item into the budget which includes a large charitable amount,” says Douglas Goldstein, a certified financial planner. People will typically keep the resolution if it is a budgeted item, he says.
Making more money: This is a financial goal for many people, especially small-business owners, every year, but many don’t attain their goals. Steve Siebold, author of How Rich People Think, says people may not reach this goal because it isn’t high enough. “Set your expectations really high. Most psychologists says to set your financial expectations really low so you're not disappointed, but this is borderline criminal advice,” Siebold says. Instead, Siebold advises to go big — and get excited. He reasons that if you're only making $50,000, for example, tell yourself you expect to make $500,000 next year. You might not actually make $500,000, but this will put you in the right frame of mind to make a lot more money.
Getting organized: You might have resolved to get your home or home office organized, but people also make the resolution to get their financial lives organized only to break the resolution shortly into the new year. “Making resolutions related to any of the financial areas is all for naught,” says Kirk Shamberger of CK Financial Resources. “That's because without having all your financial information organized and readily available, you are merely making decisions in an isolated way and there is no way to put together a comprehensive strategic financial plan.” Get your financial information and budget together now and organized so you have it at your fingertips.
Saving for a child’s college: Lloyd Lowe Sr., founder of LD Lowe Wealth Advisory, says many people think the only way to fill their kids’ college fund is through a 529 plan, but they struggle to follow through anyway. “The ideal situation would be to fund it as much as allowed by the IRS, and others in the family, such as grandparents, could contribute in place of giving money to the child for birthdays and holidays,” Lowe says. Another way to save for college is through a cash value life insurance policy.
The retirement plan: If Congress including cuts to Social Security and Medicare is any indication, it is more important now than ever to plan your own retirement savings. Lowe says that too often people break this resolution because retirement seems too far off and not a reality. How many people have thought that and ended up in a subsidized retirement building? “Try thinking of it as a bridge to the things you do not have time for while working,” Lowe says. “Those things could involve travel, starting a business, pursuing a hobby, engaging in charitable work, going back to school or simply relaxing.” Take a moment to envision what you want in retirement and maybe what you don’t, and it might become more real for you.