You may not want to overload yourself with resolutions, but the ones you choose, you should write down and display
FIRST off I hope you all had a really good Xmas and my best wishes to you and yours for a happy, healthy and prosperous 2017.
It’s that time of year again when people begin to talk about New Year’s resolutions, and the beginning of a year is always a time for optimism and hope that the year ahead is going to be a great one.
I don’t want to be a killjoy here but we have to be careful not to get too excited and get carried away too much, because the promises we make need to last all year, not just for the first few weeks of the year, only to fade away soon after.
I make reference to this because research has shown that only 8% of people achieve their New Year’s resolutions each year. And only 75% of those who set a goal have stuck with them a week later which means a quarter of us will have given up after just one week.
So, if you are serious about making a New Year’s financial resolution stick, your starting point is to ask yourself could last year have been any better.
Is this year’s resolution the same as last year’s? If it is, where did you go wrong in 2016? What was the trigger or triggers that stopped you moving forward? Were they outside your control or did you sabotage them yourself?
There are many factors you need to be aware of when trying to make any New Year’s resolution stick and the first is very simple: you need to write it down. You might think this wouldn't make a difference but it does, because it has been proven that people who explicitly write resolutions down are 10 times more likely to attain their goals than those who don’t.
So, if your resolution is to have saved €2,000 by June 30, write it down on a yellow Post-It and stick it on your fridge, put it on a calendar, just have it somewhere it will be a constant reminder to you. It might be something visual as well, maybe have a picture of a car or a beach as your screensaver so that when you open it up every day you will see what you are saving for.
Having that goal is, in itself, useless unless you create a plan that focuses on how you are going to make it happen. So you need to ask yourself how will you achieve it.
Start off by breaking down your target into small chunks because when you think of a particular number it might appear very big and the thoughts of saving that amount or paying off that amount of debt may seem overwhelming. It’s very much like losing weight, because when you think of losing, say, one stone, that might seem to be a very big number. But if you set yourself a target of losing 2 lbs a week - in seven weeks you will have lost that stone.
The same principles apply to your finances.
If you want to save that €2,000 in six months so you can go on holiday, that’s one big goal.
But how about you have six smaller goals of saving €333.33 each month?
This can be a great way to stay motivated and be able to see real progress towards that one bigger goal you are striving towards.
And you also have to ask yourself, is this really possible?
Don’t set yourself up for failure from the outset by setting goals that aren't achievable within the time period you set. Look at your budget and if you think, you can save €333.33 every month if you do this or cut back on that, then by all means go for it. But if saving €333.33 means you are going to have to live on baked beans for the next six months, then maybe don’t set yourself that target, because you will get fed up of eating beans in month two and you will just give up.
So, how about setting a target to have it saved in 12 or even 18 months instead?
Yes, it might be easier to borrow the money but financial security is about making trade-offs so when you can’t afford to buy or do everything you want in 2017, instead of financing them through a loan, simply postpone it until such time you have the money saved.
Let’s assume you can save the amount you need for whatever purpose, the next thing you need to do is follow through on your plan. You do this by setting up a standing order (S.O.) from the account your salary is lodged into, and you set this S.O. up the day you are paid.
The minute it arrives in your account, get it out as fast as it came in, so you are not tempted to spend it, and also have it directed into an account where you have to give notice to withdraw any money from it. This is a further layer of protection to stop you from dipping in and out of it. Once you have it set up, that’s it, nothing else to do and in six months, there will be €2,000 sitting in your account.
When you have everything I have referred to in place and up and running, tell someone close to you about it. Talking about what you want to achieve and confiding in a close friend will greatly increase your chances of success. A money habits and confessions survey carried out last year discovered that 74% of people agree that discussing a New Year’s financial resolution with others will make them more likely to stay the course.
We are not great at talking about money issues, particularly our own, but if you can push past this and tell one person you trust, then you will have someone to answer to other than yourself. If nobody is keeping tabs on your progress then you are only accountable to yourself and it’s much easier to give up.
Finally, a word of caution: do not move too quickly into 2017 with promises you are unlikely to keep. Give yourself every chance that the promises you make will be achieved, and remember that great intent needs to be followed by great action. Next week I will give you some ideas and suggestions for financial goals to achieve this year.
Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at email@example.com or www.harmonics.ie