Happy New Year!
You didn’t make up another list of New Year’s Resolutions again this year, did you? According to Forbes 62% of Americans feel pressured to make New Year’s Resolutions. In 2023 The top 5 New Year’s Resolutions were: 1)
1) Improve Fitness – 48%
2) Improved Finances – 38%
3) Improved Mental Heath – 32%
4) Lose Weight – 36%
5) Improved Diet – 32%
Does this list look familiar? I’m sure it does. I’m here to tell you to just chuck out your New Year’s Resolutions list. Here are 3 Reasons to Skip the Financial New Year’s Resolutions This Year.
1) They Likely Haven’t Worked in the Past
You’ve made New Year’s Resolutions in the past, haven’t you? How did that work out for you? I’m guessing not so well. Approximately only 8% achieved their New Year’s Resolutions!
Only 8%!
Do you like those odds? I certainly don’t. While we are focusing on financial New Year’s Resolutions here, how have those resolutions to Diet and Exercise worked out for you in the past? You were so excited about getting into shape to start off the New Year you sign up for a gym membership at the local gym. The first day at the gym all the regulars start staring at you because, well, they know you are a newbie. They don’t like the newbie’s taking up all the machines. Not a problem, you start exercising away. You have committed to yourself to going three times a week. You do this for two weeks. The following week something comes up and you are down to going twice a week. The following week there are more demands at work and home, and you are only going once a week.
Other things continue to pop up and before you know it by St. Patrick’s Day the gym is a quaint memory.
Now the Average Joes back at the gym are giddy because they have all their machines back now.
2) They Likely Won’t Work Again This Year
If your New Year’s Resolutions haven’t worked for you in the past, what makes you think they will work for you again this year? There is one definition of insanity. It’s doing the same thing over and over again…and expecting a different result. That sure does describe most New Year’s Resolutions, not just financial ones.
Hopefully you understand You Only Get a Mulligan in Golf and don’t want to wake up one day and realize that You’re Gonna Need a Bigger Boat to retire.
3) There is a Better Way
What should you do? First, pick another day to work on your financial goals. You can pick your birthday if you like, assuming it doesn’t fall on New Year’s. And yes, we are talking about your financial goals not New Year’s Resolutions. These goals will need to be written down and will be part of your financial plan. When designing your financial goals follow the KISS Method. Keep It Simple Silly. Simple goals are easy to understand. The easier something is to understand, the easier it is to implement. Once you have your goals written down you will need to check in with them. Every quarter review the progress you have made in achieving them. This will help you stay on track.
For example, one goal many folks have is to be able to say, I’m Debt Free. This of course doesn’t happen magically overnight. You will need to work at this. To get to this place it helps to understand The Difference Between Good Debt and Bad Debt.
One key to achieving your goals is to change your habits. Depending on the habit, there is a range from 21 days to 66 days to change a habit. 2)
Other than as a general marker, the range shouldn’t matter to you. It’s what works for you that matters. It can take me anywhere from 30-90 days to change a habit. I know, I know …I’m a slow learner. I’m OK with that. What you are trying to do is to create your own New Normal. One day at a time, one habit at a time. While we are primarily addressing financial habits here it applies to any habit.
When looking at changing your habits start small. This is critical. You need to start. And you need to start small, very small.
By doing this the bar will be very low. This is a good thing. With a low bar it’s easy to get over it. When it’s easy to get over the bar you will gain confidence. When you gain confidence, this will allow you to eventually raise the bar. Keep in mind; we are talking about a marathon here, not a sprint. Running a marathon is 26.2 miles. That’s a long way in anyone’s book. And that’s what we are talking about here, habits for the long haul and for the rest of your life. Sure, most millennials will likely have a longer run than most baby boomers that recently retired. That’s fine. The point is to address your situation wherever you are at your station in life now and going forward. For an excellent book to read about changing habits pick up One Small Step Can Change Your Life by Robert Maurer. Oh, and only work on one habit at a time.
Repeat, only work on one habit at a time.
Don’t try to quit smoking, start exercising and start being nice to your mother-in-law all at the same time. The odds of being successful changing any of these habits decline significantly.
For example, let’s say one of your financial goals is to save more for retirement. Let’s assume that you are currently putting away 6% of your earnings into your 401(k) plan at work. A small goal would be to increase this to 7%. Once this is done, you will have a few less dollars in your pocket when you get paid. This may mean a few less trips to Starbucks (SBUX). That’s fine; remember you’re making progress with your goal. And it’s just a small change. This is one small habit change that you can stick with. Having a low bar makes it easy to get started. And more importantly keep going. Once you are comfortable with saving 7% of your earnings then increase it to 8%. I suspect you will be surprised how easy it is to do this.
The “Seinfeld Strategy”
Jerry Seinfeld, the wildly successful comedian, actor, writer, and producer had his own strategy to track his progress daily. It involved putting an X on a big wall calendar every day he accomplished his task. He initially needed more jokes to tell. Therefore, he determined that he need to write more jokes…every day. The goal was to write every day and then put an X with a big, red magic marker on the calendar EVERY DAY. Said differently, the approach was a ‘Don’t Break the Chain Method.’ This visual is to track your progress and build momentum going forward.
You don’t necessarily need to use the Seinfeld Strategy. Although, well, you might want to look at the results he got from it. If this doesn’t work for you, figure out an approach that does.
This article is original content written by Manchester, CT Financial Advisor Thomas Scanlon, CFP®, CPA.