As the ball dropped and 2020 rained down on us, our minds shifted from where we’ve been to where we are heading. Many of us immediately pressed our New Year’s resolution “START” button with Olympian-style determination and vigor. Unfortunately, for the vast majority, that determination and vigor will fizzle out almost as quickly as a sparkler on the 4th of July. According to U.S. News, approximately 80% of resolutions fail by the second week of February. Why? What derails us from achieving our resolutions? For many it comes down to being a creature of habit, lack of accountability and organization of ideas, the absence of motivators, and a damaged mindset that comes from years of repeatedly not following through on resolutions/goals. If you want to change the outcome of your financial New Year’s resolution(s) in 2020, you must be intentional and follow the process.
Set Realistic Goals & Write Them Down
Goals are dreams we strive to make a reality. When we write them down and keep them in a place we walk by and see every day they have officially made the transition from something we consider to something we choose. They become reminders, motivators, and actionable items. Dr. Gail Matthews of Dominican University of California conducted a study on goal setting. He found that we are 43% more likely to achieve our goals when we write them down.
Rank them in order of importance and you gain even more clarity. Be specific. Don’t just say “pay down debt.” Try “cut my credit card debt in half by a specified date.” Jot down how you plan to do this underneath, as well as the benefit you will derive as a result. For example, cut back in buying lunch and going out to dinner and apply those dollars towards my monthly credit card payment.
Break Goals Down into Manageable Chunks
You can have more than one goal, but don’t take on too many at once. This can lead to feeling overwhelmed and breed frustration since the impact may be diluted due to resources flowing into multiple areas, addressing different goals at the same time. Ask yourself, would you rather make 50% progress on one goal rather than 5% on ten? Every goal should be matched with a timeframe:
- Short-term goals: These are goals typically achieved within a year. Saving for a family vacation, saving to buy a new bedroom set, etc. are examples of short-term goals.
- Intermediate goals: These are goals typically achieved within one to five years. Examples may be saving to buy a new car, saving for a down payment on a house, paying down debts.
- Long-term goals: These are goals that take longer than five years to achieve. Some examples are saving for your child’s college education or saving for your retirement.
Perhaps you would like to travel and see new places more in 2020. That is somewhat of a vague goal, so maybe a short-term goal would be to visit the national parks in your state. An intermediate goal might be to travel to see two new states. A long-term goal may be to travel to a new country.
Another way of looking at breaking goals into more manageable pieces is perspective-based. Say you want to save $5,000 for a vacation by the end of the year. That may seem like a daunting task. However, if you break it down into savings per month, it isn’t as intimidating. Instead of seeing $5,000 written out every day, you can write $416.67 per month.
Be Willing to Break Old Habits
Break Old Habits to Leave Room for Positive Ones That Correlate with Your Goals
Breaking a bad habit is essentially about rewiring your brain. The more often you exhibit a specific behavior or perform an action, the more it gets physically wired into your brain. To break yourself of a bad habit, you must identify why you are choosing to break it, the benefit in doing so and do the legwork needed to help implement the change. You must also notice when your motivation is at its peak and take advantage of that. According to BJ Fogg, a psychologist and director of the Persuasive Technology Lab at Stanford, it isn’t about trying to increase motivation as much as taking advantage of motivation when you do have it. So, when motivation is high, take immediate action on all the things you find difficult to start and maintain. By the time your motivation wave has ended, you may have created a new positive behavior and broken yourself of a bad habit.
For the good habit to become sustainable, it must be made increasingly automatic. Start small enough for it to become consistent from the onset. For example, in saving money, start at $10/month so it isn’t as painful. Then, in time, increase it to $20/month. By the time you reach larger amounts, it will already be an embedded habit. The sooner you start, the more impactful the results thanks to the power of compounding!
Use Automation & Tools
We live in a world full of resources and tools. Why not use them to increase the chances of achieving our goals? There is much to be said for set and forget tasks. Set your accounts up so a specified amount flows into your emergency fund and/or savings account automatically every month. It is one less thing you must remember to do, and if it is automatic, you’re less likely to miss it. There are tons of tools and online apps available to help keep you on track:
- Personal finance apps such as Mint. It is one of the most well-known apps that provide your complete financial picture in one place. You link your credit/debit cards to your account and Mint pulls your transactions and shows how you’re spending your money. You can create a budget, monitor your credit score, track your investments and add email reminders to your phone calendar.
- Debt payoff apps such as YNAB. You import transactions from your checking account and apply them to each budget category to get an accurate picture of your spending. Detailed reports are available so you can watch your progress and determine areas where you can improve.
- Budgeting apps such as Every Dollar. This app uses the zero-based budget method. A built-in monthly expense tracker allows you to connect to your bank for the importing of transactions. Y
- Goal-setting tools such as Day Zero Project and habit tracking apps.
Measure Progress & Reward Yourself
Track whether you are on the path toward meeting your goals. If you are only 50% of the way toward meeting your goal by the specified time frame, determine if there is anything you can do to close the gap. If you have completed a goal, celebrate! Do something as a reward for achieving what you set out to do. Completing a goal creates a surge of pleasure and feeling of accomplishment which in turn increases motivation and productivity. So, don’t deprive yourself of a pat on the back or weekend trip to celebrate.
If you have questions or would like to start a conversation, please reach out to us at (410) 824-1853.
Sources: Motley Fool/ Forbes/ Medium.com/The Balance
© Geier Asset Management, Inc. January 2020. Dan Mules, CPA is a Client Manager and Tax Planning Professional for Geier Asset Management, Inc., a Registered Investment Advisor. The articles & opinions expressed in this material were gathered from a variety of sources, but are reviewed by Geier Asset Management, Inc. prior to its dissemination. All sources are believed to be reliable but do not constitute specific investment advice. The views expressed are those of the firm as of January 2020 and are subject to change. These opinions are not intended to be a forecast of future events, a guarantee of results, or investment advice. Any advice given is general in nature and investors must consider their own individual circumstances. In all cases, please contact your investment professional before making any investment choices. Geier Asset Management, Inc. is not responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.