New Year’s resolutions occur when we arbitrarily choose the first day of the year to change an aspect of our lives.
It’s a strange behaviour which studies show leads primarily to failure. One such study from 2018 showed that less than 8 percent of people that undertake New Year’s resolutions manage to achieve their goals.
Apart from fitness and lifestyle goals, such as quitting smoking or alcohol consumption, resolutions regarding personal finances are a major focus for people that set their aims high for the upcoming year. If you are ever to succeed in reaching your financial goals, it is important to understand how these resolutions register in your mind and what you can do to keep them from remaining pipe dreams.
The Psychology Behind New Year’s Resolutions
Another study from 2005 uncovered a differentiating factor between people that succeed in keeping their New Year’s resolutions and those whose attempts tend to fall flat. There is no shame in having previously failed to get your finances in order. On the contrary, it’s important to realize that prior failed attempts do not guarantee the outcome of your future efforts. We’re here to make sure that you pinpoint the factors that are keeping you back and help you set a new course beyond the proverbial icebergs that seek to sink your efforts.
The research demonstrated that people that viewed self-discipline and self-control as dynamic factors were highly likely to achieve their goals. These people tended to have a belief that there is nothing they cannot achieve and generally have a go-get-em attitude. This group also tended to set more resolutions and pursue multiple improvements simultaneously.
On the other hand, people that self-identified as naturally falling into their current situation were far less likely to succeed. Having an attitude that exudes: ‘I can’t help spending money on frivolous things I can’t afford,’ is a recipe for disaster. In this case, the person accepts their fate and the New Year’s resolution is simply a way to temporarily escape the clutches of the deeply-rooted negative belief.
Breaking the Pattern
Luckily, even though our outlook and the way we self-identify may be negative, there is nothing that prohibits us from changing. The current attitude you have about your finances, which may have led you into debt, is not an inescapable genetic trait passed down from your ancestors. Making a financial resolution and sticking to it is a matter of breaking your current pattern.
A poor financial situation is a matter of negative indoctrination. The detrimental beliefs you may currently hold about money were imprinted into you in the same way that you can use to break away from them.
Success with money is an exercise in positive habit creation. Just as developers can use the same programming languages to create catastrophic viruses that destroy computer networks, the same languages can be used to develop helpful software that makes our lives easier. If you are not where you desire with your personal finances, it is through limiting habits that you are kept there. The way forward is to create constructive habits in the place of the old ones that are holding you back.
How to Achieve Your New Year’s Financial Goals
Now that you know that achieving your New Year’s financial goals is a matter of having the right attitude and changing your habits, it’s time to look at the actionable things that will drive your success.
- Plan for Success
Deciding to change your finances is a great pursuit. Succeeding at it will change your life for the better. However, you need a plan that will bring you to your destination. Take the time to record your current situation. Make a list of your debts, your income and any assets you may have that could be sold in order to cover some of your liabilities. Write out a monthly projection for the coming year so that you know what to expect moving forward.
- Place High-Interest Debt First
Getting your finances in order will require you paying down your debt. Place a higher priority on paying down debt with high interest such as that arising from credit cards or high-interest loans. These high-interest bearing debts are the ones that add the greatest burden to your finances. Getting rid of them will be like dropping sandbags from a hot air balloon.
Even though eliminating debt altogether should be your goal, consider getting a low-interest loan in order to pay off the higher interest liabilities you have. This can give you a little more room in your monthly budget and allow you to use the extra money to further pay down your debts.
- Live Below Your Means
This step requires you to revisit what we talked about regarding positive habit creation. If you partake in activities that you can downsize or even exclude from your weekly routine, you may want to consider it. For instance, resolving to cook at home rather than eating out can save you a few dollars a week. Going out on the town for drinks can be a way to relieve stress but will put a hole in your finances. By changing your habits, you will be saving valuable funds while also improving your health.
- Enhance Your Income-Gaining Abilities
Cutting expenses is one way of improving your finances. The other way is to increase your income. Whether you’re an employee or a business owner, there are always things you can do to increase your income.
As an employee, you can build your skill set in an attempt to provide greater value to your workplace. If you can provide added value to your employer, you can shoot for a pay hike. If your current work conditions do not support such a pursuit, you can look for a part-time job or a work from home opportunity to supplement your income.
Business owners can hone their skills and add to their arsenal by employing tools to increase profitability. If you focus on streamlining your business processes, you can vie for more customers and sales.
- Save and Invest
Once your debt repayment plan has been put in place, it will be time to look into saving and investing. The money left over from your expense-cutting and income-boosting actions should be put to productive use.
Consider setting some money aside every week in order to create a rainy day fund. Your ultimate goal should be to create wealth without having to trade your time for it. Eventually, your money should bring you money.
Reach Out for Support
The probability of achieving your financial goal is always higher when you have someone in your corner. In team sports, athletes can rely on their coaches’ knowledge and experience to drive their efforts. However, even in individual pursuits like tennis or combat sports, athletes have coaches and other specialists to help them with their training, nutrition and strategy.
It’s always best to have someone that will provide the necessary support and give you a little nudge if you get off track. Make a New Year’s financial resolution you can keep. Resolve to change your finances for the better. And remember, you don’t have to wait until December 31st to start your journey to financial freedom.
Contact us today and let’s talk about how we can help you achieve your personal finance goals.