A lot of people make resolutions for the New Year, and while a majority of the resolutions that people make revolve around health, a surprising number of them are financial in nature.
The annual New Year Financial Resolution Study by Fidelity Investments reported that 67 percent of Americans were considering a financial resolution, up from 61 percent at the end of 2018. Americans are optimistic about their finances, with 78 percent believing they will be better off financially in 2020.
The study also revealed that the top three financial resolutions remained consistent with previous years: saving more, spending less and paying down debt were the top picks.
Experts recommend that every American make a new financial resolution each year. Even if people don’t keep their resolutions for more than a month or two, resolutions are an effective way to combat financial troubles. As the new year approaches, here’s some advice from experts here in Alexandria on the best financial resolutions to make — and how to keep them!
It’s Never Too Soon To Begin Saving
Emily Harper, a financial planning associate with Monument Wealth Management recognizes that at different stages of life, there are different priorities to think about and commit to: New parents are going to have concerns that may not be shared by a 40-year-old and vice versa.
The one financial resolution that Harper recommends is to create a policy for how much and where to save extra cash flow — especially for Millennials. She acknowledges that young professionals may be at a point in their career where they’re making enough money to pay the bills and find themselves wondering what exactly to do with the rest or spending it unwisely.
The number of choices on how to save and what to prioritize can be daunting, which is why Harper advocates for using a Certified Financial Planner (CFP) to work on a project basis in order to evaluate cash flow. Having a general understanding of why you are saving and investing is the main key to success.
“It is much less tempting to overspend if you have a savings plan in place with a clear direction,” she said.
Retirement Planning Should Start Early
Ask any financial advisor when you should begin planning for retirement and they’re likely to give you the same answer: It’s never too early. Whether you are a single parent or part of a large family, saving for retirement is a necessary investment.
Greg Sullivan, CEO/President of SBSB, Sullivan, Bruyette, Speros, and Blayney, LLC recommends starting to save as early as possible, and seeking professional advice and guidance by the time you’re in your 40s. By that stage of life, you have likely accumulated assets but may not have a cohesive plan in place that connects your long-term goals, such as retirement and college tuition for your children, with your short-term goals, such as paying off student loans.
In Sullivan’s book, “Retirement Fail”, he examines the many reasons why adults fail post-work life. In order to avoid these financial pitfalls, he recommends finding a professional financial advisor attuned to your needs who will help you objectively look at your goals and concerns in order to create a concrete plan for the future.
Resolutions Should Be Realistic and Achievable
Financial experts say that resolutions, like goals, are best accomplished when they are specific. Shannon Rowan, Senior Vice President and Director of Trust and Wealth Management Services at Burke and Herbert Bank agrees with that sentiment.
Rowan said resolutions oriented toward improving finances generally swap long-term gains for short-term sacrifices — similar to those that focus on dieting and exercise.
“We know it’s good for us but we only reap the benefits – such as better health – over time.” People often fail to follow through with their resolutions because they have made them too big or too broad. Much like health resolutions, vague objectives like, “I will eat better” are not as effective as affirming that you “will lose 10 pounds by March 1.” Statements such as “I resolve to save more” don’t place as much gravity on change as statements like, “I will start an automatic savings plan of $500 per month beginning March 1st.”
To be successful, be specific and have a plan in mind with clear results that you want to accomplish.
How to Keep a New Year’s Resolution
Just one person in every 12 — that’s how many people will really keep their New Year’s resolutions long term, according to research from the University of Scranton. While many people start with the best of intentions, actually keeping those resolutions beyond January is difficult. Once you’ve decided on a resolution or two, what’s the best way to actually keep it?
AUTOMATE. For financial resolutions, the best single move you can make is to automate the process. Instead of manually moving $100 to a savings account with every paycheck, set up an automatic transfer through your bank or credit union’s online bill pay service. Or, if your employer does direct deposit of your paycheck, ask them to divert part of it into a different account that you won’t touch. There are also apps and certain credit cards that round up every purchase you make to the next dollar, putting the change into a separate savings account.
ATTITUDE. No matter what the resolution is, sheer willpower won’t get you too far when it comes to staying on track. What can help is having an attitude of gratitude and developing positive relationships related to the resolution. For many, it helps to have a “resolution buddy” who can help keep you accountable, no matter what your goal.
HABIT. A University of Chicago study says it also helps to make your resolution a habit first — and doing whatever it takes to kick start the development of that habit.
REWARDS. For some people, building rewards into the development of habits can help. In addition, plan to give yourself bigger rewards after hitting certain specific milestones.
VISUALS. For those who are crafty or visual, creating a Dream Board or Vision Board can also help keep up motivation. Seeing photos and progress charts of what you want and including visual representations of what you’ve accomplished so far can keep momentum going.
Even changing the background photo on your mobile device to one that motivates you and reminds you of the long-term goal can provide a nudge in the right direction.
