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Financial Education

How to Make—and Keep—a Financial New Year’s Resolution

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We’ve all made New Year’s resolutions: Lose weight. Stop smoking. Get organized. Learn to (insert sport, hobby or skill here). Exercise more.

We’re finally going to achieve that goal, we tell ourselves.

Until we don’t. A pair of surveys show that about 31 percent of resolutions don’t last a month.

For 2019, approximately 32 percent of survey respondents said their New Year’s resolutions were related to their finances. If that was your goal and you fell short, or if you are looking forward to setting that goal for 2020, preparation is key to success.

The Planning Stage

Unrealistic or vague ideas of our income and expenses will never provide a foundation to start seeing measurable savings. Most of us may know the figure on our paycheck each week or every two weeks, but it’s the lack of budgeting on our expenses that can sabotage the good intentions to grow our savings.

Before you can set a realistic resolution, you’ll need a clear picture of your monthly obligations, plus the extras you’re spending your money on. Start by tracking your finances using free budgeting apps. One of the most popular all-in-one personal financial management apps that syncs all of your accounts, from your checking account to your credit cards to your investments, is Mint. Wally is another popular free app for tracking money coming in and going out of your account. It does not link to your financial accounts (so if you forget to enter a deposit or expense, it may not match with what you actually have in your account), but it does help cut down on spending. Goodbudget also helps cut spending, and builds on the concept of the envelope system, where cash is set aside in 10 separate envelopes (for the free version) for things such as groceries, entertainment, etc.

Once you’ve logged your spending for a month or two, your financial trends will become clearer to you. Mark down everything—even the dollar you put into the vending machine at work. You might not think much about that $5 coffee you buy each morning on the way to work until you see it in the app and realize you’re spending $25 a week—that’s $100 a month—on something you could make at home and pour into a travel mug. 

Identify Your Resolution

You have a much better chance of success with your resolution if it’s attainable. “Lose 100 pounds” is a difficult resolution to achieve, and you might give up after not much time has passed if you don’t have a strategic game plan of how you intend to work toward this goal. An alternative goal could be, with smaller, achievable goals: “Lose five pounds a month by implementing a safe and healthy plan to shed 100 pounds and keep the weight off.”

If your ultimate goal is to pay off your student loan, start by setting a realistic goal, like reducing the balance by an additional $2,500 by the end of the year. That’s about $200 extra a month, and with your budget figured out, you’ll know where the extra money is coming from.

What are some New Year’s resolutions you can achieve to better your finances?

  1. Save more money. Break that broad goal into specific ones that are attainable. Those include creating a rainy day fund with a specific amount of money in it by the end of the year, increasing your existing savings so that you have six months’ worth of living expenses put away, or raising your retirement account contributions each month by 10 percent, for example.
  2. Spend less money. Look at your budget to see where you might be overdoing it. Trips to the mall and dinners out are good places to start.
  3. Pay off debt, such as student loan debt and credit card debt.
  4. Make one more mortgage payment each year. That one extra payment on a 30-year, fixed-rate loan could shave as much as five years and thousands of dollars in interest payments off the loan.
  5. Pay more attention to your finances. That includes requesting a free credit report to look for errors that could negatively impact your credit score, which is reviewed when you go to apply for a loan, for example, or studying your investments. Check your 401(k) statements regularly to look for underperforming, or losing investments, and shift your funds if necessary (consult your financial adviser).

The Foundation

Armed with your newfound knowledge, it’s time to make changes:

  1. Open a savings account and set up automatic transfers to it. You don’t want delays if your goal involves saving for something big, such as the down payment for a house or a new car.
  2. Tell yourself that if you have to borrow money to pay for something, you can’t afford it. Try taking the credit cards out of your wallet when you go shopping, and pay cash instead.
  3. Speaking of credit cards, will paying off your balance be your resolution? Calculate how much extra you’ll be able to pay each month and commit to this by setting that amount as an automatic payment.
  4. Commit to at least one day or weekend that you won’t spend any money, and get your significant other or a friend to join in. Forget your weekly Saturday night dinner and a movie, or your Sunday round of golf or trip to the mall. Grill the steaks that have been in your freezer since the big meat sale and binge watch reruns of your favorite TV show. Grab that bestseller you’ve been wanting to read and sit outside on a pleasant day.

With preparation, you’ll be armed for success for the New Year. Why not get started today?

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CUNA 2023 diamond award trophy icon

CUNA 2023 Diamond Award Winner

Financial Education

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