As the new year approaches, most people’s attention will automatically turn to resolution-making. While well-intentioned, new year’s resolutions are notoriously difficult to keep.
Therefore, we’ve put together this helpful guide to provide tips for setting and sticking to financial new year’s resolutions.
We begin by explaining why resolutions often fail before offering some practical tips on how to set and then stick to your resolutions throughout the year.
So, why are new year’s resolutions typically so difficult to keep?
Why do New Year’s Resolutions Fail?
Research shows that around 80% of people who make new year’s resolutions abandon them before February is out. Resolutions often fail because people typically set unrealistic goals and don’t break them down into milestones. As a result, people lose motivation and simply give up.
But as we explain in this article, there are effective ways to make financial new year’s resolutions that you can stick to throughout the year – you just need to know how to set your goals and monitor your progress, as we reveal below.
How to Set Financial New Year’s Resolutions
The first and most important thing to acknowledge when setting financial new year’s resolutions is that you need to be realistic. While we all might like to earn $10 million in the next calendar year, it’s unlikely for most.
So, follow these tips to ensure that your resolutions are realistic and attainable this year:
Name your goal
Begin by naming your goal and knowing what you want to save for. It’s not enough to say, “I want to become financially secure” or “I want to become wealthy,” as these goals aren’t easy to define and are different for everyone. Here are a couple of examples of clear and attainable financial goals:
· I want to save £10,000 to clear my credit card debts and end the year debt free.
· I want to save £4,000 by July to pay for a summer vacation to Italy with my family.
· I want to finish the year with £6,000 in my stocks & shares ISA.
· I want to save another £7,000 by the end of the year to have enough to make a deposit payment on an apartment.
As you can see, the above goals are all specific and realistic and will help to guide your savings throughout the year. You can also break them down into more manageable goals (be it weekly or monthly) to track your progress throughout the year.
Set a time frame
Another important consideration when setting your annual financial goals is to think about the time frame. The table below shows some general examples of short and long-term financial goals:
You can realistically save for a holiday in a year or less, but it’s unlikely that you will have enough money saved for your child’s education in twelve months. So, consider whether your financial goals are short or long-term and set a time frame accordingly.
Work out how much to save each month
Given that most people are paid monthly, it’s helpful to translate your annual savings goals into monthly targets so you know how much to set aside when you receive your salary.
Using the above four examples, here’s how much you would need to save each month to meet the respective financial goals:
· £10,000 to clear credit card debts by the year’s end: £834 per month.
· £4,000 to pay for a family holiday by July: £667 per month.
· £6,000 in stocks & shares ISA by the year’s end: £500 per month.
· £7,000 to contribute to a house deposit by year’s end: £584 per month.
Create a budget
Now that you’ve set your financial goal and worked out how much you need to save monthly to achieve it, you’re ready to create a financial budget for the year ahead.
When budgeting, you need to include all of your income and expenditure, including things like tax and debt repayments.
You may even need to cut back on some non-essential expenses to help you achieve your stipulated financial goal. You can check out our super helpful guide to household finances & household budgeting.
Open a savings account
Practically, the easiest way to monitor your financial progress throughout the year is to open a savings account. You can transfer funds directly from your current account each month and regularly check in with how well you’re doing. Our savings jars are ideal for helping you attain your financial resolutions, as they enable you to effortlessly organise your spending and savings.
Stay on track
Remember, eight out of every ten people who set new year’s resolutions abandon them before the end of February.
One of the main reasons for this is that they fail to stay on track and struggle to monitor their progress. Therefore, to successfully achieve your financial goals, you need to check in with your budget at the end of every month, ensuring that you’re on track. This also helps you to identify opportunities for increasing your savings and gives you the opportunity to celebrate your financial wins throughout the year.
Tips for Sticking to Your Money and Savings Resolutions
Now that we’ve covered setting new year’s resolutions, it’s time to consider the best ways to stick to your money and savings resolutions, which is perhaps the biggest challenge that most people face.
So, here are some tips to bear in mind as you work toward your financial goals this year:
Live below your means
To successfully achieve your financial goals, it’s likely that you will need to live below your means. Now, this doesn’t mean you need to live in poverty – far from it. Rather, living below your means is a skill that enables you to live comfortably without spending every penny that you earn.
We cover some top tips on how to live below your means in this insightful blog post.
Be patient and stay disciplined
Financial planning is a long-term activity, and you’re unlikely to see results overnight. Therefore, when setting your financial goals in January, don’t expect the world to look different by February.
Be considered and committed to your approach, and by the end of the year, you will reap the rewards of your discipline.
Have realistic expectations
Building wealth and achieving financial freedom takes time, and you need to be realistic with your expectations. Many of us would love to earn millions of dollars in a year before retiring early to a beach in the Bahamas, but it’s not realistic.
Being unrealistic with your financial resolutions will almost certainly cause you to fail, so be true to yourself and set targets that you know you can feasibly achieve.
Make it a habit
Automating your savings wherever possible will help you in the long run. Saving money shouldn’t be something extra that you think about; rather, it should be part and parcel of your monthly money management processes.
So, when you’ve set your financial goals, automate the act of saving, and you will find that your resolutions are much easier to achieve.
Always keep learning
There are lots of ways to save money and improve your financial foundation. Listen to podcasts and follow YouTubers who teach you the fundamentals of money management, and see which habits you can incorporate into your daily life.
You should also be open to various investment strategies – such as ISAs in the UK – as they can be effective when it comes to growing your wealth throughout the year.
Use online tools to help you save money
In today’s digital world, there are various online tools that you can use to help you save money. For instance, our app is a great tool that you can turn to improve your money management.
You can allocate savings jars, earn rewards, and set spending controls to help you achieve your financial resolutions – all on your smartphone. So, if you’re worried about not sticking to your annual financial goals, consider turning to tech to help you.
Have a support system
Although financial resolutions are typically a personal thing, you don’t have to do it alone. Involve your partner or parents in your financial goals and ask them to hold you to account. You can even hire a financial planner if you want to grow your wealth this year, as they’re privy to different ways in which you can manage and invest your money.
Saving money and achieving your financial goals is something that you should be proud of. Therefore, be sure to incentivise your achievements and reward yourself accordingly. For instance, you might arrange a meal out at your favourite restaurant when you hit a specific savings goal, which can be a great way to celebrate your achievement and work towards the next one.
While the vast majority of people who set new year’s resolutions break them, make 2023 the year that you actually achieve your financial goals.
This handy guide has explained how to set and stick to resolutions to help you meet your realistic financial objectives before the end of the year. For a little extra help when it comes to achieving your resolutions, our pre-paid card is an ideal way to manage some of your finances.
You can also check out our recent blog post, where we introduce some of the reasons why saving money is so important for your future if you’re looking for a little extra motivation at the start of the new year.