New Year’s Resolutions and Your Finances

Tax Planning

There are few celebrations I like as much as a good New Year’s party. If you had a bad year, it’s a chance to regroup and close the book on a year you’d like to forget. If you had a good year, it’s almost like a challenge – can you do better than the last twelve months?

Either way, it’s a time to reflect on the past with an eye towards the future.  It’s also why New Year’s resolutions are so popular.

Now is a perfect time to think about how you can improve your situation moving forward. While you don’t need an excuse like a new year to make better financial decisions, the reality is that this is a good time to mark a new beginning, and try to hold yourself accountable.

New Year’s resolutions are a time-honored tradition, and financial resolutions are among the most popular goals to set. Unfortunately, it’s all too easy to let these resolutions fade as the year progresses (and sometimes they fade as early as February).

The good news is that it is possible for you to make resolutions that stick.

Here are a couple of strategies that can help you make New Year’s resolutions that you are more likely to keep:

Make a List

Rather than trying to tackle all of your financial goals at once, make a prioritized list. What do you want to tackle first this year? Just as multi-tasking can actually detract from your productivity and the quality of your work, trying to work on several financial goals at once can be a recipe for disaster and frustration.

Instead, figure out which goal you want to accomplish first. Then list the other in order. Rather than thinking that you have to get them all done in the year, realize that it can be a work in progress. Check off items on your financial to-do list as you move forward; it should be more about progress than any hard deadline.

The power of checking items off your list is also very motivating. Your list of accomplishments can fuel you to make more changes and improvements.

Focus on One Big Thing to Work On This Year

Alternatively, what’s your biggest, most important financial goal for the coming year?

Rather than trying to set a bunch of small goals and working on several things at once, focus on your most important goal for the year. Are you trying to work up toward maxing out your retirement account? Do you want to save up for a vacation? Are you trying to become debt free?

Figure out your most important goal, and then focus on that. You can break it down into manageable steps so that it’s easier to accomplish over time, but there is no need to set a bunch of goals — half of which will be discarded.

Set one goal, and take the whole year to work on it.

Take Small Steps to Make Lasting Improvements

Finally, you can recognize small steps that you can take to make lasting improvements.

One of the reasons that New Year’s resolutions often fail is due to the fact that people often set large, unrealistic goals that are unsustainable. Instead of going big at the beginning and trying to make changes that you won’t be able to keep up with for more than a couple of weeks, start small.

Take small steps to change your habits. That way, they become lifestyle changes, rather than financial goals. If you want to cut $500 fat from your budget, you don’t start out by cutting $500 immediately. You can start by looking for $50 to cut for the first month. Or even just $5.

Once you are comfortable at that level, you can look for another $100 to cut. Start small, and work up to the goal over the course of the year. Your changes will be more likely to be permanent.

And remember to celebrate the new year!

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