I have made many New Year’s Resolutions that have to do with money. I resolve to spend less, save more, or be more responsible with my money. The problem is, I have failed at these resolutions more than I have been successful. Now, when I make a resolution, I try to follow the 3 M’s.
I make a resolution that is:
Measurable – Saying that you want to “save more” or “spend less” can be problematic because it is hard to know whether you were successful or not. How much more do you want to save? How much less should you spend? Setting a goal such as “I resolve to save $100/month in 2020” is something that can be measured. At the end of the year, you can look back and see whether or not you saved $100/month. The same can be said for spending. You could set a goal like “I resolve to spend $25/week or less on eating out for lunch.” Again, you can easily track whether or not you met that goal. Whatever resolution you make, ensure that you can track your success by making it something that you can measure.
Manageable – It can be tempting to set a very large goal as a resolution. You might decide to save 50% of your salary each month. While that goal is easy to measure and is an admirable goal, it might not be possible for you to save that much. Most of us have non-negotiable expenses such as housing, transportation, food, debt repayment, etc. that exceed 50% of our take-home pay. Focusing on covering your existing expenses while saving a reasonable amount is a much more manageable goal. A good place to start is to resolve to save enough each month into your retirement account to take full advantage of your employer match. Taking advantage of this employee benefit will double your savings at no additional cost to you. If you are unsure what your employer match is or how to contribute to your company’s retirement plan, contact payroll or human resources at your job and inquire about ways to participate in the company plan. Making manageable goals for spending is also important. It might be tempting to resolve to avoid eating out for all of 2020. While that would save you a considerable amount in your food budget, is it really reasonable to assume that you would never eat out? Set a goal to eat out a little bit less than you did in 2019, maybe 1-2 meals/week. If that works well, you can cut back a little more in 2021. This gradual change will be much more manageable and will increase your odd of success.
Meaningful – Sticking to anything is much easier when you have a good reason to do it. Saving a little extra each month is a lot easier when you label that savings account something like “Trip to Rome.” It gets even easier when you create a separate savings account for that purpose and label it that way. You might also consider using one of your savings goals to help pay down debt. If once or twice a month you use the money that you saved from brown bagging at work or cooking meals at home to make an extra payment on your student loans, the sacrifice will feel worth it.
Making resolutions can often feel like a fruitless exercise since many of us, myself included, often fail to stick to them. Hopefully 2020 will be an exception by making resolutions that are measurable, manageable, and meaningful.
If we can help you to work toward keeping your resolutions give us a call. We are happy to discuss ways that we might help.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss.