The first thing I mention when talking with folks about financial resolutions in the New Year is the root of the word “resolution.”
Hint: It comes from the word “resolve.”
Most people who set New Year’s financial resolutions commonly like to focus on “big rocks.” In other words, they tend to zero in on solving larger, more difficult money challenges such as paying down mortgages, planning for retirement or saving for a child’s college education.
While this may seem like the best approach, financial resolutions should start with bad financial behaviors from the previous year, not weighty goals that can take much longer than a year to achieve.
If you’re an agent or advisor with clients who aspire to achieve total financial wellness, encourage these people to focus on behaviors first and “big rocks” second, and specifically review areas that need improvement over the previous year.
Here are four tips to help individuals properly set financial resolutions for 2017 and make them easy to achieve.
Financial resolution tip No. 4: Adjust the budget
First and foremost, you need to take a look back. How was your spending last year? Where can it be improved or dialed back? Identify the big expenses along with any hidden costs that may have slipped past you. Those costs could be as simple as your daily coffee runs to Starbucks. Flag them for the New Year.
The easiest way to stick with financial resolutions is to find the ones that can be most easily accomplished and start with them. Get specific, and figure out why you might be spending too much or not saving as much as you would like to. Resolving the issues that kept you from hitting your goals in the previous year will set the table to knock out those “big rocks” in the New Year.
For example, something as simple as making your coffee at home in the morning instead of going to Starbucks could save you $3 to $4 per day, or $60 to $80 per month, or $720 to $960 per year.
Another thing to be conscious of is lending money to family and friends. Too often, this amounts to giving cash away. It can be tempting to help out the people you care about. But people who always give in to those temptations could do significant damage to their savings.