If you’ve made financial resolutions in the past and didn’t keep them, you’re not alone. According to a Forbes Health/OnePoll conducted in October, the percentage of people resolving to improve their finances in 2024 is second only to those who want to improve their fitness. Unfortunately, the poll also showed the average resolution is abandoned less than four months in.
Reasons Financial Resolutions Fail
There are many reasons people don’t keep their resolutions generally, and financial ones specifically. Most of the obstacles to success are inherent in the resolution itself.
For example:
- The resolution is too vague. A goal to “improve your financial situation” is very broad, so you have no way to measure if you are making progress.
- The goal is unrealistic. If you set a goal to save $10,000 for a new vehicle this year, but you only have enough in your budget to save $300 a month, you have failed before you start.
- You don’t have a plan. Most goals can seem daunting on their own, but having a plan that breaks it down step-by-step makes it achievable.
Set SMART Financial Goals
This technique has been used in business for years, and it applies well to goals in general. SMART stands for Specific, Measurable, Attainable, Relevant, and Time Bound. Here’s how it works.
Specific
State exactly what you will achieve and how. If your goal is to grow an emergency fund, determine how much you want to have in the account by the end of the year, and how you will reach it.
I will start an emergency fund and grow it to cover three months of living expenses by transferring a portion of each of my biweekly paychecks into the fund.
Measurable
Quantifying your goal lets your track your progress and know when you have succeeded.
I will start an emergency fund and grow it to $3,250 by transferring $125 from each of my biweekly paychecks into the fund.
Attainable
You must be realistic about what is possible, so some research may be needed. In this example, if you look at your monthly income and expenses and realize that transferring $250 per month into your emergency fund will mean you can’t cover your essential expenses, you may have to scale the goal back (or find a way to reduce your fixed expenses). Also, maybe you know you’re likely to forget to make two monthly transfers and fall behind, so you decide to set up an auto-transfer and let us do it for you.
I will start an emergency fund and grow it to $2,700 by scheduling an auto-transfer of $100 from each of my biweekly paychecks into the fund, and by adding $100 from my tax refund.
Relevant
This answers the “why” behind your goal, which provides motivation. It’s the reason you made the resolution in the first place.
I will start an emergency fund and grow it to $2,700 by scheduling an auto-transfer of $100 from each of my biweekly paychecks into the fund, and by adding $100 from my tax refund. This will allow me to continue to meet expenses for three months if I am laid off, giving me time to find another job.
Time-Bound
Giving a deadline for your goal holds you accountable, provides ongoing motivation to stick with it, and lets you know when you have succeeded and can celebrate.
I will start an emergency fund and grow it to $2,700 by December 31, 2024, by scheduling an auto-transfer of $100 from each of my biweekly paychecks into the fund, and by adding $100 from my tax refund. This will allow me to continue to meet expenses for three months if I am laid off, giving me time to find another job.
Most resolutions last a year, which gives you a chance to celebrate your success and reevaluate the goal, if necessary, for the next year. So, if your overall goal is to ultimately grow your emergency fund to $10,000, you may revise and reuse the same resolution for several years in a row, adjusting as needed based on your current circumstances.
Your Partner in Success
When it comes to achieving your financial resolutions, we’ve got the expert advice, products, and services you need to succeed. Whether you want a new car or a new home, or are planning for college or retirement, count on our team to help you achieve your goals. Stop by or call to schedule an appointment at any of our branches to learn more.
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