The New Year is an opportunity for fresh starts, and new beginnings. Quitting a bad habit, losing weight, exercising more, and doing better with money are common New Year's resolutions. Year after year, the goal is always to do better in the coming year.
By Ground Hog's Day, most resolutions have fallen by the wayside. Why? People beat themselves up too much and give up too easily. They mess up one time and, instead of trying again, call it quits.
These resolutions have more in common than popularity. All revolve around activities most people engage in every day. The way a person eats, spends money, and exercises develops over many years. Changing old habits and routines overnight is a tall order, and rarely possible.
Messing up now and then goes with the territory. A day or two of overeating, overspending, or skipping the morning walk is a setback, not a reason to give up. Get back on track with your resolution as soon as possible to minimize the harm done.
Persistence is the key to success. Stick with your program more days than not, and results will follow. Over the course of a year, even small changes to your daily routines can make a big difference.
Walking 30 minutes a day will not make you thin overnight. Drinking one less soft drink, passing on doughnuts, and the money you save by skipping these daily treats may seem insignificant. But sticking with these small changes day after day adds up.
A positive attitude makes a difference. Focus on the benefits—what you get from sticking to the program—rather than what you are giving up. Obsessing about the sacrifices you are having to make and all your pain and suffering guarantees failure. Banish this negativity from your thoughts. Think positive!
Steps to help you manage your money better in the coming year:
- Know where your money goes. Find out how much money comes in and exactly what you do with it. Carry a pad with you for a month or two and record every purchase. At the end of the month, separate your spending into no more than a dozen categories such as food, housing, and transportation. Target eyebrow-raising surprises for spending cuts. If you have never tracked your spending, you will find you spend a lot more than you thought for some small, frequent expenses. If the amount of money you spend on something bothers you, do something about it.
- Set realistic and specific goals. A specific goal includes the cost of the goal and the date you plan to reach it, such as planning to save $600 by next December for holiday gifts. The goal is realistic if you can afford to set aside $50 each month. If you cannot, adjust the goal or increase your income.
- Develop a plan for spending to meet goals. Besides goals, your spending plan needs to include fixed, variable and occasional expenses. Fixed expenses are the same every month. Variable expenses go up or down each month. Occasional expenses are due less often than every month. Some occasional expenses, like birthdays and annual insurance premiums, you know about. Others, like medical bills, arise unexpectedly.
- Pay yourself first. Saving whatever is left usually means not saving at all. Instead, put the money you need to save for goals and occasional expenses in your savings account before you spend a penny for anything else. Better yet, arrange for an automatic deposit or payroll deduction into your savings account. When you get a raise at work, sign up for half the raise amount to go into a savings account or a company savings plan.
- Eliminate debt. Pay attention to how much you pay in monthly finance charges on credit card and other debt. Instead of paying interest each month on your debt, you could be earning it on your savings. Being on the lending side of that transaction is a much better deal than being on the borrowing side. The money going to debt payments each month could be going to your savings.
- Focus on one expense at a time. When making changes, it is easy to go too far, too fast. Commit to making a few changes at a time to reduce your spending. Stick with the changes until they become second nature. If you miss a day, a few days, or even a week, do not give up.
These simple suggestions can help you do better with the money you have. Some changes pay off more rapidly than others. The sooner you start, the more you stand to gain.
For more research-based advice and resources to help build financial stability in 2014 visit www.fcs.uga.edu/ext/econ/.
(Michael Rupured is a financial specialist with University of Georgia Cooperative Extension.)