How to Set Financial Resolutions For the New Year

If you’ve tried setting New Year’s resolutions in the past, you’ve probably had experiences where you end up failing to meet your own self-assigned goals. But you’re not alone. Research suggests that only around 12% of people who set New Year’s resolutions end up succeeding in reaching those goals.

Fortunately, these shortcomings can usually be explained for a few different reasons. By anticipating those causes and planning to overcome them, you can increase the odds that you will succeed in setting financial resolutions for the year ahead.

Those reasons are:

You lack a specific goal.

Vague goals are difficult to track and stick to once the new thrill of having a resolution wears off. Financial goals can be particularly difficult to maintain if you don’t have clear financial benchmarks for reaching them, such as savings goals, retirement age targets and other specific data points to guide your planning.

You fail to frame the goal in a positive light.

Focusing on the negative behaviors you’re trying to correct can end up increasing the risk of that behavior. If you’re trying to cut your shopping budget, for example, all of your mental focus on shopping could tempt you into indulging in that habit. Instead, focus on the positives of decreasing your spending.

You don’t set goals that align with your personal desires.

Are you motivated to make changes because of how you are perceived by others? If so, your motivation can wear off quickly. The best way to set resolutions that stick is to choose goals that align with your personal desires and financial goals rather than what other people want you to achieve or how you want to present yourself to friends, family, co-workers and other acquaintances. 

As you create your own financial goals, consider where and how these obstacles might get in the way of your efforts. How can you avoid these pitfalls by changing up your financial plan? What kinds of accountability and support can you set up for yourself to help you reach those goals?

When setting a financial resolution, make sure you have a clear finish line that you’re working toward. If you don’t have a clear goal — along with milestones to help you track your progress and enjoy moments of celebration — you might find yourself discouraged by the sacrifices and changes you’ve made without reaping the benefits of those efforts.

Here are some tips to maximize the value of these goals when creating your New Year’s resolutions:

Choose specific dollar amounts whenever possible. 

Concrete goals are easier to see in your mind, easier to plan for in your monthly and annual budgeting, and offer more satisfaction when you hit certain milestones or even reach the goal itself.

For savings goals, figure out how long it will take to reach that goal.

Understanding the timeline is key to staying motivated — and it will also give you peace of mind that your current plan is sufficient to reach those financial goals at the right time in your life if you’re saving for a down payment or even retirement.

Make sure financial goals are realistic. 

Financial goals should be achievable within your current income and expense constraints. If you set goals that you have no clear path to achieve, you’re very likely to abandon those goals and your newly formed habits.

Set modest goals that you can exceed rather than lofty goals you may struggle to meet. 

If you’re flexible about your savings goals, set more conservative goals and give yourself permission to go above and beyond, you’ll be more motivated by staying ahead of the curve, and you’ll experience less day-to-day financial stress as a result.

Account for saving, investing and other new goals in your monthly budget.

When you set goals, make sure they fit your monthly and annual budget. If you want to save X amount of dollars per month toward a new financial goal, for example, you need to have space in your budget to make that happen.

In many cases, financial goals require adjustments to your budgeting and money management habits as well as to your long-term financial planning. If you’re determined to save for a down payment on a house, for example, this may affect your ability to reach your investment goals over that time, and/or it could force you to scale back discretionary spending.

Whether budget adjustments are the resolution itself or a supporting piece of your larger financial goal setting, you will need to develop a plan that will create space in your budget for all of your financial goals, using a single resolution to effect change across many aspects of money management and financial planning.

As you approach your own budget analysis and financial planning adjustments, ask yourself the following questions:

Which budget categories are least important to me? 

Rather than forcing yourself to suffer through painful budget restrictions, you might instead consider which forms of spending offer the least satisfaction. This could help you trim spending without feeling like it’s a sacrifice.

What recurring expenses could I cut down or even eliminate?

Subscription-based services are one type of expense that can be very costly when ignored — especially if you don’t regularly use or benefit from those services.

How can I make smarter decisions around my spending to increase my savings and overall progress toward financial goals? 

Consider behavioral changes such as avoiding impulse spending, using a cash-only budgeting system to set strict spending limits or making savings and investment contributions at the start of the month rather than waiting until the end.