The turning of the calendar year represents a clean slate for many people, an opportunity to wash away the mistakes of the past and start anew with a fresh path through life.
Unfortunately, even well-intentioned New Year’s resolutions end in failure. Why? Resolutions are often set up to fail from the get-go. Many resolutions tend to fall into several common traps that make it excessively hard to succeed. Financial resolutions are no different.
[See: 10 Foolproof Ways to Reach Your Money Goals.]
If you want to make an effective New Year’s resolution for your money, follow these six strategies to choose a goal that avoids common pitfalls.
Pay yourself first. If your resolution is centered around saving for a goal or eliminating debt, the most powerful thing you can do is to pay yourself first by taking that money out of your paycheck as soon as you receive it. Put it immediately into savings or make an immediate debt payment and figure out how to make ends meet with what’s left.
If you don’t immediately subscribe to this strategy for your financial goals, something will always come up that feels more urgent and will cause you to skip your savings or your debt payment this time around. Once you’ve excused that, it’s a quick road to failure and complete abandonment of your goal.
Automate, automate, automate. The most effective way to pay yourself first is to automate it. Work with your bank to have your savings automatically deducted each pay period. Many banks can automate transactions, such as transferring $100 into your savings account every time a deposit of more than $500 appears in your checking account.
If you automate your steps toward your financial goal, then it becomes harder for you to make choices that lead to failure. It’s far easier to just leave that automation in place.
Talk to your bank about making your financial goal as automatic as possible. See what automation options yours offers. If your bank can’t help, consider switching to a bank that can.
[See: 12 Simple Ways to Raise Your Credit Score.]
Put as much of the resolution under your control as possible. In other words, make sure that the success of your goal relies on your actions, not the actions of others.
For example, if your goal is to get promoted at work, consider a different goal because you’re putting the success and failure of that goal into someone else’s hands. Instead, set a goal where you’re in control by scheduling a meeting with your boss and coming up with a list of things you can do to put yourself in line for that promotion, then make it your goal to complete that list.
Focus on completing actions that lead to success rather than to results. Many goals are centered around the end product, such as saving enough money for a down payment. Rather than focusing on the end product, think of the actions you need to take in order to make that end product happen.
For example, if you save $100 a week and don’t touch it, then you’ll be on your way to a down payment at the end of the year. So, make that your goal. Save $100 a week this year. If you complete that goal, then you’ll have the money you’re wanting to save. Plus, the resolution is now centered around your actions, not a nebulous goal.
Break things down into actions for today and focus just on those actions. Once you have a goal that’s focused on action, break it down into actions you can do today. If you want to save $100 this week, what can you do today to make that goal happen?
Maybe you can choose to start eating most of your meals at home, so your daily goal is to simply make an inexpensive family dinner at home. If you can spend $15 less per day on your family’s meals, then you have that $100 per week. So, your daily goal is to simply save $15 by making a family dinner.
[See: 14 Important Personal Finance Dates to Mark on Your Calendar.]
Try to build “streaks of success.” Once you’ve started identifying and executing daily actions that will lead to the success that you want, try to turn those daily actions into “winning streaks.” Put up a whiteboard somewhere in your home and write down your daily goal. Each day you succeed, mark an “x” after that goal. Any day that you fail, erase all of the x’s.
What you’ll find after just a few days is that you dread erasing all of those x’s, and it’s so easy to just add another x to the mix. You’ll want to find a way to make that daily x happen, even if it’s not convenient. That will drive you toward your overall goal.
If you use these strategies to think through your big financial resolution for the year, transforming it into something that’s either automated or broken down into a clear daily action (or both) and tied to your actions, not another person’s choices, you’ll find much better results than if you just look at a large end goal. Good luck.
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How to Build an Effective Financial New Year’s Resolution originally appeared on usnews.com
