Elizabeth Westendorf here. I’m an Associate with Fearless Finance® by Atwood Financial Planning. New Year is always a time when people start looking at making financial changes. I am going to chat with you today about how to set your New Year’s resolutions up for the best chance for success!
We all know how this goes. January 1st rolls around, you set a resolution for the year, and by the end of the month, you’ve forgotten about it entirely. Gym memberships get used for only a couple weeks, healthy grocery shopping gives way to take-out or frozen meals (just me?), etc. Setting a resolution isn’t enough—you have to make sure you’re setting appropriate resolutions. An all-or-nothing mentality just sets you up for failure.
The same is too often true for financial resolutions as well! Resolving to bulk up your emergency fund? Pay off debt? Save more in retirement? If you completely cut out all optional spending, track every cent coming in and going out of your accounts, and penny pinch your way to lower bills, you aren’t likely going to be able to sustain that pace. It’s like saying that unless you go to the gym every day for at least an hour, you’ve failed at your goal of getting in shape. Instead, break goals into manageable pieces.
Typically, budgeting options are all or nothing, even those that profess to be hands off. But by cutting out most of the noise in your monthly cash flow (those items that are mandatory spending or fixed expenses), it’s much easier to stay on track with your finances and only pay attention to what is really going to move the needle. Your budget should work on autopilot for you. Otherwise, being smarter with your money is likely going to go the same way as all those other failed New Year’s resolutions.
Are you already monitoring your Full Discretionary spending (Blue Points, if you’re an AFP client already) and want to jumpstart your saving more in the New Year? Try a temporary resolution! Here are a couple of suggestions:
- Try a low-spend month. See what you can cut back on in your Blue Points spending–not permanently, but just for a month! Look for free activities and entertainment. Try setting a limit for optional spending that is lower than your typical amount. See how that feels throughout the month, and then next month, return to normal. If any of the changes you implemented in your “low-spend” month were pretty painless, then maybe consider making those permanent.
- Cook from your pantry! This doubles as a great way to get rid of the odds and ends that have been lurking in the back of your cupboards for too long. Get creative, find new recipes, and see how much you can do without extensive grocery shopping.
- Focus on your energy bills. Can you turn off the lights more regularly? Can you drop your thermostat by a degree or two? Fun fact—it takes about 2 weeks to adjust to a new household temperature. After that, what might have been originally chilly will start to feel comfortable. In some areas (like Cleveland, OH!), you can request a free energy consultation. Someone comes out to your house to make recommendations, and they also give you free low-flow sink faucet aerators and showerheads. You’re saving money and conserving resources when you implement some of these changes.
The common theme here is that all of these ideas would become exhausting if you practiced them for too long. Short spurts are the goal here—and any money you save by doing one of these challenges can go straight into savings or your investment account. On top of money saved, you’ll come away with new entertainment ideas, new recipes you like, or more environmentally conscious habits! It’s a win-win all around.