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As we embark on a brand-new year, it’s tempting to make all kinds of money resolutions (especially after holiday spending leaves a hole in our pockets). But as it turns out, there are some goals that aren’t all that great for our finances.
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Here are some resolutions to cross off your list in the new year, according to experts.
Quitting Spending ‘Cold Turkey’
One of the most popular New Year’s resolutions related to money is quitting spending altogether. according to Linda Chavez, founder and CEO of Seniors Life Insurance Finder.
She warned, “This approach can often backfire and end up causing more harm than good for your finances.”
While it may seem like a simple solution to just stop spending money, Chavez notes it’s not always realistic or sustainable.
“Completely cutting off all expenses at once can be overwhelming and lead to feelings of deprivation,” she explained. “This can then result in impulse purchases or binge spending, ultimately throwing off your budget and financial goals.”
Instead, she advises to consider setting smaller, achievable goals for cutting back on unnecessary expenses. This allows you to gradually adjust your spending habits without feeling like you’re depriving yourself.
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Saving Too Much
Another common New Year’s resolution, according to experts, is to save more money.
Chavez said, “While saving is important for building a strong financial foundation, setting unrealistic goals or trying to save too much at once can be counterproductive.”
She adds that setting aside a large portion of your income for savings may leave you with little left over for necessary expenses. This could then lead to using credit cards or taking out loans to cover these expenses, ultimately putting you in debt.
Rather than trying to save a large amount of money at once, she recommends aiming for gradual increases in your savings. This could include setting aside a certain percentage of your income each month or finding ways to cut back on expenses in order to increase your savings.
Not Budgeting Effectively
Creating a budget is essential for managing finances and achieving financial goals. However, Chavez warns simply creating a budget without proper planning and tracking can be ineffective.
“It’s important to regularly review and adjust your budget as needed in order to accurately track your spending and savings,” she continued. “This allows you to identify areas where you may be overspending and make necessary changes.”
Additionally, it’s important to set realistic budgets that align with your income. Trying to stick to an unrealistic budget can lead to frustration and feelings of failure, making it difficult to maintain effective budgeting habits.
Giving Up Credit Cards
According to Marcus Phillips, founder and managing director of Mortgages, one usual money-saving New Year resolution many people set is giving up credit cards.
“People take it because they think it can help them avoid unnecessary credit card debts,” he pointed out. “While the intentions are good, the outcomes aren’t.”
He said that cutting off credit cards can be detrimental to your finances in the future. For instance, you won’t have any credit score, which “can become problematic when you want to get loans, as many lenders prioritize credit scores.”
Instead of giving up credit cards, he suggests trying to use them wisely and resolve to improve your credit score, which will be more financially helpful.
Not Seeking Professional Help When Needed
“Many people make the mistake of trying to handle their finances on their own without seeking guidance from a financial advisor or planner,” said Chavez.
While there are plenty of resources available for managing personal finances, she recommends seeking professional help to provide valuable insights and advice tailored specifically to your financial situation.
“A financial advisor can help you create a personalized plan for achieving your financial goals and offer guidance on budgeting, saving, investing and more,” added Chavez. “They can also help identify potential red flags in your finances, such as high interest debts or unnecessary expenses, and provide solutions to address them.”
Neglecting Financial Education
In today’s digital age, there is no shortage of information and resources available for financial education. However, Chavez said many people make the mistake of neglecting their own financial education.
“Taking the time to educate yourself on personal finance can help you make more informed decisions and avoid potentially costly mistakes.”
This could include reading books or articles, listening to podcasts, attending workshops or seminars, and even taking a course.
“Incorporating financial education into your New Year’s resolutions,” said Chavez, “can not only help improve your current financial situation, but also set you up for long-term success and stability.”
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This article originally appeared on GOBankingRates.com: 6 Money Resolutions That Aren’t Actually Good for Your Finances
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