Yahoo Finance New Year's Resolutions that will make you richer
We don’t have a great track record for sticking with New Year’s Resolutions. Our research shows that of those people who’ve made money-related resolutions in the past, one in 20 haven’t even made it to the end of the first day of the year before giving up, while around one in five fail before the end of the first week, and more than one in four give up before the month is out. Change is always going to be hard, but one of the reasons we’re falling short is because we’re making things too difficult for ourselves. Once we know the three things that are scuppering our resolutions, it’s much easier to stick with them.
We’re too vague. One of the most common money resolutions is to spend less, but if we just stop there – with no roadmap of how we’re actually going to achieve this – we’re highly unlikely to be successful. It would be like pledging to get fit without committing to any extra exercise.
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It means starting with a bit of legwork, and working out where your money is going. Your current account app may break this down for you, or you might need to keep a spending diary for a while. That way you can identify the spending you’re not getting enough out of – whether it’s a gym membership or a TV streaming service - and specifically stop that spending.
We’re often too ambitious too – trying to change too many things at once. We’re so keen to turn over a new leaf that we overload ourselves. The key is just to change one thing. Once you’ve cut your costs, you should have freed up some money from your budget to spend on whatever is your financial priority. If you have expensive short-term debts, paying these down should be top of the list. Once you’re managing those, you can look at protecting your family with things like insurance and a will. Then you can consider saving and boosting pension contributions. Your first step will depend on where you stand right now, but don’t try to take too many steps at once or you’ll exhaust yourself.
We try to do the hard things first. When we’re cutting back on spending, we’re often told to cut out luxuries like a morning coffee or a takeaway on a Friday. Certainly cutting back is a great idea, but if your resolution depends entirely on you making a hard decision every single morning, you face a much bigger risk of failure. It’s a better idea to start by giving up the easy things first – like paying too much for boring groceries like toilet paper or pasta, or sticking with an expensive broadband package when there’s a cheaper alternative in town.
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We can also make things easier by setting our good habits up to happen automatically. When you cancel your direct debit to the gym, for example, you could set one up to go into a savings account, or to pay off your debts, or to make extra pension contributions – whatever you have decided is your priority. If you set it up for payday, it’ll leave your account before you have time to notice it, and you’ll end up automatically doing the right thing every month.
Sarah Coles is a personal finance analyst at Hargreaves Lansdown and co-presents Switch Your Money On podcast.
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