And how you can correct them
9 Reasons Your Financial Resolutions Are Failing
by Gary Foreman
Setting Monetary Goals
My Story: Achieving Financial Goals
My Story: The SMART Goal System
Here's a great conversation starter. Sometime around February 15th ask people how their New Year's resolutions are coming. Chances are that only a few will be successfully moving towards their goal. Most of them will reluctantly admit that they're not doing so well, but still hope to do better.
Many failures are not because the resolution was unattainable. Often lack of success is caused by misunderstanding the resolution or poor planning and execution. So even if you're already failing in your New Year's financial resolutions, don't despair! There's still a way to keep them and achieve your goal.
Consider the questions below and see how many relate to you and your resolution. Then take the action suggested to put yourself squarely on the track to success.
- Do you know why accomplishing this resolution is important to you? It could be that it's not important and failure is not a big deal, but if the goal does matter, then knowing why is important, too. Understanding how a resolution could change your life is a huge motivator.
- Did you plan out your strategy? Unless your financial resolution was a very simple one (i.e. only buy fast food once a week), you'll need a plan on how to achieve it. Creating a plan will help you to understand the resolution better. You'll also get an idea of what it will take to reach a successful conclusion.
- Have you considered how your personality affects the resolution? If you have some bad financial habits, there may be a reason for them. You could be making up for some childhood deficiency or current psychological need. Take a little time to study the habit you want to change and why you've persisted in the habit. Skip this step and your resolution could be doomed to failure, but understanding why could go a long way to keeping your resolution.
- Did you create specific steps to reach your goal? Saving $1,000 by the end of the year is a great goal, but deciding to bring your lunch to work three days a week and put the money saved into a savings account is more likely to be successful. We need ways to measure our progress on a regular, frequent basis. Failures can cause us to correct our course. Successes can be celebrated.
- Did you create small, reachable steps? Not only do tasks need to be specific, but they also need to be small enough to be accomplished. Your resolution might be to set up and put money in an IRA this year. The first step is to research potential custodians for the account and their advantages and disadvantages. That's a task that you can complete in a week or two. Then move on to the next small step.
- Do you have a way of keeping track of your progress? A resolution without any way of measuring progress is really just a wish, and concrete measures like dollars or days are better than how you "feel" about something.
- Did you decide in advance that one failure would not end the quest? It's easy to get discouraged when we fail, but missing one target or deadline doesn't mean that we need to give up on the resolution. Perhaps we only manage to save $950 during the year instead of the $1,000 we resolved. If we put the failure behind us and renew our efforts, we will continue to move closer to our goal. If we quit, we end all progress.
- Did you build in any accountability? Like our initial conversation starter, none of us like to admit that we've failed, and that can work to our advantage. If you haven't already, tell your best friend forever about your resolution and the individual steps to get there. Give them permission to ask about your progress. Just knowing that they'll be asking will help stiffen your determination when it's weak.
- Have you decided how to reward yourself for success? Many resolutions have a reward built in to their accomplishment (i.e. save enough to buy a new car), but others like saving for retirement or paying down debt don't have such tangible rewards. Treating yourself to an inexpensive reward can be a good way to keep you motivated as you keep your resolution.
With these nine tools applied to your resolutions, you've increased your odds of success immeasurably. In fact, there's a good chance that at next year's party you'll be the one telling how your resolution changed your financial life!
Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money and he's a regular contributor to CreditCards.com. You can follow Gary on Twitter or visit Gary Foreman on Google+. Gary is also available for audio, video or print interviews. For more info see his media page.
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