Tips for staying on track with your financial resolutions
YOU'VE reached the end of January, but how are your New Year resolutions going. No doubt you made a few of them.
It's not a bad idea - simple lifestyle changes can improve our health and put valuable dollars back in our pocket. The trick however is to make your resolutions last the whole year, and that can call for a couple of clever strategies.
Resolutions often involve our wellbeing, and goals like quitting smoking for instance, are definitely worthwhile. Along with health benefits, if you're a pack-a-day smoker you could save over $10,000 annually and potentially halve your life insurance premiums by kicking the habit.
Even small steps like swapping three takeaway dinners for home-cooked meals each week can see you save $3,120 over the year according to comparison site Mozo.
The problem is that even with the best of intentions, our resolutions rarely make it to Valentine's Day. So here are a few tips to make them stick.
- We tend to set overwhelming goals like 'I want to get out of debt'. A better approach is to set a small but specific targets.
- Something like 'I will pay an extra $100 off my credit card each month' makes it easier to stay committed to your resolution and track your process over the next 12 months.
- Technology can take the hard work out of keeping up with financial goals. If you've made a pledge to 'save more', try breaking it down into a bite-sized target like 'I plan to save $50 each week' (or whatever your budget will allow). Then set up an automatic funds transfer of this amount from your everyday account and into a savings account.
- With savings on auto-pilot, after a few weeks, unless you are on a very tight budget, you won't miss the money. Start today and by saving $50 a week you could have $2600 by the end of the year.
- If you have resolved to save more for retirement, ignore what your friends or peers are doing, and focus on your own goals.
Researchers from Harvard University ran an experiment to see how much more workers would contribute to their retirement savings if they knew what their colleagues were contributing. It turned out this actually discouraged people from adding to their retirement nest eggs. Many were demoralised by the sums that some of their colleagues were able to save, and felt as though they were falling behind.
This highlights how building wealth isn't a matter of keeping up with the Joneses. It's about setting your own goals and consistently working towards them at the pace you can manage.
Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.