New year, new me (who is better with money). This is what many Americans hope they can accomplish when they set a financial New Year’s resolution. Some may even set more than one in the hopes of reaching several money milestones in the new year.
However, many money-themed New Year’s resolutions just don’t pan out and may be forgotten within a few months. Why is that? GOBankingRates spoke with two financial planners to learn more about the most common money resolutions that tend to fail — and what to do instead.
‘I’m Going To Save More Money’
Making a resolution to simply save more money tends to fizzle out fast.
Mike Hunsberger, CFP and owner of Next Mission Financial Planning, said the reason why a resolution like saving more money fails is because it’s too vague. A successful resolution is concrete and one where the person who sets it has a plan to achieve it.
“Someone who wants to save more will instead say I’m going to automatically have $200 from each paycheck deposited into my IRA or 401(k),” said Hunsberger. “Because it’s automatic, it removes the future decision so there is less chance you won’t do it.”
‘I’m Going To Spend Less Money Eating Out’
Similar to the resolution about saving more money, this one often fails due to its vague nature. Again, Hunsberger stresses the importance of making a resolution where a specific goal is set.
“Someone who wants to not spend as much eating out can say ‘I’m going to only eat lunch out one time per week or six times per month’ so you have two extra days if something special comes up,” Hunsberger recommended. “This allows you to plan your week/month and have a chance to actually spend less.”
‘I Will Pay Off All My Credit Card Debt by the End of the Year’
There are two things wrong with making this kind of New Year’s resolution, according to attorney and personal finance expert Erika Kullberg. The first is that the person who sets it needs to quantify the goal. The second is that it’s necessary to create a list of action steps to reach the goal.
“You need to take note of how much debt you have and how much money you need to pay in total each month (this means surpassing the minimum monthly payment in most cases) to pay off the debt in full by the end of the year,” said Kullberg.
Once you know how much debt you have and the amount necessary to pay each month, Kullberg said you’ll be able to make a plan for how to afford these extra payments. A few suggestions include working a side hustle or finding discretionary expenses to cut from your budget.
Much like Hunsberger, Kullberg also agrees that the more specific your money resolutions are, with clear and actionable plans to reach each one, the more likely you’ll be able to fulfill them.
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