Save more, spend less and pay off debt are popular New Year’s
resolutions — and perhaps the ones most likely to fall by the wayside a
few weeks into the year when reality sets in and expenses derail plans.
But an early-in-the-year setback, like paying your health insurance
deductible or the credit card bills after a costly December, doesn’t
have to knock you off course.
After all, you made those
resolutions, so you can change them. And making more specific
resolutions that are easier to maintain rather than just giving up could
put you in a better financial position next year. Here’s how to get
back on track.
MAKE YOUR GOALS MORE SPECIFIC AND REALISTIC
Broad
resolutions like “I want to save more this year” can be a helpful
starting point, but they make it hard to track your progress. Keeping a
specific goal in mind — like a wedding, debt payment or buying a house —
puts a dollar amount to your financial goals and gives you something
concrete to work toward.
“My goals are more tangible this year,”
says Yasmeen Alshabasy, a Los Angeles-based clinical study assistant.
“They can be measured and quantified, instead of the symbolic plans I’ve
made previously, like gaining more financial freedom.” She has an exact
savings goal for the year and plans to use an Excel spreadsheet and
tracking app to monitor her weekly budget.
Also, make sure goals
are within reason and won’t cause added stress. It may be tempting to
set an ambitious savings target, but stay within a range that makes
sense for your income and regular expenses.
“Setting achievable
targets is really important for me,” says Clayton Becker, a Ph.D.
student at the University of California, Los Angeles. He and his fiancee
have set their first joint financial goal: saving for their wedding in
spring 2024. “Trying to do too much too soon is just going to make you
jaded with the process — you’re going to burn out.”
SET UP REGULAR CHECK-INS
Checking
in formally on your finances only once a year can be overwhelming.
Setting up midyear, quarterly or even monthly appointments with yourself
or your financial planner — if you have one — can help keep you on
track and allow you to change your goals if necessary.
Becker and his fiancee, for example, are planning a dedicated midyear check-in.
“Knowing
that’s coming takes a mental weight off,” he says. “We’re trying to
save a relatively significant amount, but not so significant that we
can’t make adjustments if we find we’re behind halfway through the
year.”
Choose a check-in interval that feels reasonable for you to
regroup: long enough that you’ll have made progress but not so long
that there’s no time to pivot if necessary.
OFFLOAD SOME OF THE WORK
Keeping
track of your financial progress throughout the year can add an
unnecessary mental load to your plate. Consider implementing some
automation to your money goals, like a monthly account transfer you can
set and forget.
“We’ve set up automatic deposits into our joint
savings account,” Becker says. “That way, we don’t have to make active
decisions about what to save every month.”
For credit card debt,
you could schedule monthly payments that are bigger than the minimums.
Taking that responsibility off your hands in advance can reduce
day-to-day financial stress and make it more likely for you to meet your
targets.
For managing large investments,
hiring an expert
can be worth the cost. Look for a licensed, registered fiduciary,
preferably one who is fee-only, meaning they don’t make commissions by
selling you financial products. Finding a certified financial planner,
or CFP, is a good place to start.
“It’s worth it for me to pay a
wealth management team to handle my investment portfolio — especially
given the economic climate,” says Ashley Porras, a Cambridge,
Massachusetts-based business development manager at a biotech company.
Her main financial goal this year is to preserve her savings during the
current market downturn and minimize future losses.
If you have a
small portfolio and an uncomplicated financial situation, an in-person
adviser might not be necessary; an automated financial adviser could
help you manage your portfolio and offer guidance for a much lower
price.
BE FLEXIBLE
It can be tempting to make drastic
changes every January and set extreme resolutions for your finances. But
a less-stringent, more-forgiving approach could be more sustainable,
especially when unexpected expenses come up.
Consider setting
monthly limits for “wants” and rolling discretionary spending over to
the next month if you surpass the limit instead of eliminating wants
completely. Most importantly, don’t abandon your goals after a setback:
Overspending by $100 is still better than overspending by $1,000, and
making an effort adds up.
“Flexibility and adaptability are key,”
Porras says. “Especially with factors outside your control, it’s far
better to understand the variables and work to create a solution than
being passive and accepting defeat.”
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This column
was provided to The Associated Press by the personal finance website
NerdWallet. The content is for educational and informational purposes
and does not constitute investment advice. Dalia Ramirez is a writer at
NerdWallet. Email: dramirez@nerdwallet.com.