Studies show that about 80% of New Year’s resolutions end up failing. Many are abandoned as early as February. One of the main reasons for this is that people make resolutions that are big, too daunting and basically unachievable.
This is true of any resolution, but especially in the case of your finances. ‘Save £5,000’ is a great financial resolution, but if you have never saved before, it might be too ambitious as a start. Instead of making one-time big New Year’s resolutions, focus on prioritising savings year-round.
Keep resolutions realistic
According to Psychology Today, one of the big reasons New Year’s resolutions fail is setting goals that aren’t clear. Why are you saving and investing? What are your financial goals for the short- and long-term future?
If you don’t have clear answers to these questions, it’s time to sit down and consider them. Then you can create clear, manageable steps to achieve your goals. Instead of a vague savings amount, write down how much you’ll save every month. Then create a budget and figure out where you’ll cut down expenses to make more money available to save.
Use saving challenges year-round
Money-saving challenges are a fun and easy way to set money aside without even feeling it. They also help establish savings habits that can last a lifetime. Some saving challenges require you to save all your £5 notes, while others, like the 52-week challenge, encourage you to put money aside all year long.
If saving money on your own is hard, there are plenty of apps available that can help. For example, the smart money management app by Plum offers interest-bearing ‘goal pockets’. With this feature, you can set money aside with a specific goal and amount, and the app will keep you updated with percentage progress.
Jump back in after a slip off
If your commitment to your New Year’s resolution is slipping off by February, being prepared can help. Sit down for a few minutes and look at how you use your time.
Maybe you need to spend less time on Instagram or binge-watching Netflix and more time working on your goals. Or you need to look more deeply into why you’re not on track to meet your goal. Is it about anxiety or stress? Or maybe your environment is not conducive to healthier habits.
Re-evaluating your goals and adjusting them can also help. Maybe your original goals were too big and unattainable. Or maybe they were too broad. ‘I will save £25 a week’ is a more manageable and achievable goal than ‘I will save £1,200 this year’ because it gives you something you can focus on every week.
Re-evaluate your goals every three months
Reviewing your financial progress every quarter allows you to understand your achievements and areas for improvement. This can help you figure out if you need to modify your New Year’s resolutions to serve you better for the rest of the year.
Major life changes, including moving, getting married or divorced, or changing jobs can also impact your financial life. If you’ve recently undergone big life changes, consider whether your financial resolutions need to change as well.
