Although the COVID-19 pandemic continues to rage on, the new year holds hope and promise and, like thousands of years past, New Year’s resolutions. Around the world, people are setting goals and making promises to exercise more, eat healthier and reduce stress. Plenty of people are also vowing to optimize their finances. They might be looking to save more money, improve their credit score, budget better or give up credit cards.
Unfortunately, some of the most well-intentioned financial New Year’s resolutions could be doing more harm than good. GOBankingRates consulted financial experts to learn the most common “bad” financial resolutions they’re hearing from clients for 2023 and why they’re doomed to fail.
If you made any of these promises for the new year, it’s best to revise them so that they can work for you and not against you. See what the experts said on how to reshape your goals, too.
Bad Resolution 1: ‘I’m Finally Going To Take Control of My Finances’
“This is a great resolution to have. The problem is, most people say this, but they don’t have a plan to back it up,” said Steve Siebold, a certified financial educator (CFEd) and author of the book “How Money Works.” “Without a plan that specifically spells out how you are going to take control of your finances in , things will never change. This is no different than the person who says he is going to lose 50 pounds but hasn’t figured out how he is going to make the change.”
The Better Resolution: ‘I’m Going To Sit Down With a Financial Planner’
“If you are really serious about taking control of your money, sit down with a financial planner and make a detailed plan that will help you get your financial house in order once and for all,” Siebold said.
Bad Resolution 2: ‘I’m Going on a No-Spending Diet”
“One of the worst financial resolutions you can make is to go on a no-spending diet,” said Robyn Goldfarb, MBA, A Dime Saved. “It seems like it could be a great quick fix for your overspending or budgeting problem but crash diets are rarely effective; in fact, it can often cause you to spend even more money.
The Better Resolution: ‘I’m Making a Realistic Budget’
A less exciting but more effective resolution, Goldfarb said, is to work out a budget that you can realistically stick to. Now, keep in mind that vowing to budget can be a bad resolution in itself, so it’s important to go about budgeting in a productive way.
“Budgeting goes awry when people make it complicated, and try to make it work ‘backwards,'” said Tanya Peterson, vice president of Freedom Financial Network. “To avoid the ‘backwards’ problem, (don’t start) with pure dollars and cents; instead, list out short-term and long-term goals, then build and modify the budget around the goals. Recognize that this year’s goals may well be different than pre- or post-pandemic ones; perhaps they will include things like having time to learn a language or train for a half-marathon.”
Bad Resolution 3: ‘I’m Going To Cook More’
“Setting out in the new year to cook more at home and spend less on take out is a common goal with the hopes of saving money and reducing debt,” said Andrea Woroch, family finance expert and TV personality. “However, you can still overspend on groceries and waste money on food, which could turn your good intentions into a bad financial move without learning how to properly plan your grocery purchases.”
The Better Resolution: ‘I’m Going To Do More Meal Planning’
A better goal for the new year is to start meal planning, which Woroch said requires a bit of forward planning, but is worth the effort.
“Always cross-reference your pantry or fridge when writing out your shopping list so you don’t double up on ingredients,” she said. “When you’re done with your grocery shopping, you can even make a little extra money back on your purchases by uploading pictures of your receipts to the cash-back app Fetch Rewards, which rewards you with points toward free store gift cards like Target and Walmart, which could further reduce your grocery and food spend.”
Bad Resolution 4: ‘I’m Going To Stop Spending on Nonessentials’
“One popular financial resolution that most people have is to stop spending money on nonessential items,” said Fo Alexander, a certified financial education instructor (CFEI) and founder of Mama & Money, a personal finance site for women.
“Though on the surface it appears to be admirable, it’s not quite practical. The idea is that if we stop spending money on nonessentials, that it will magically transform our finances for the better, which just isn’t true. Although reducing nonessential spending does allow us to save money and focus on other financial goals, it can detract from our quality and enjoyment of life.”
The Better Resolution: ‘I’m Going To Start Planning My Nonessential Spending’
“Instead of trying to stop spending altogether, the better alternative is to plan for those extras within a budget,” Alexander said. “Planning for discretionary spending not only mitigates overspending, but it allows you to actually enjoy life without the fear of ruining your finances. Consider setting aside a few dollars each pay period for those Target runs, brunches and other outings that you enjoy.”
Bad Resolution 5: ‘I’m Shredding All My Credit Cards and Closing the Accounts’
“Cutting back and/or a temporary pause in charging can be a very good thing for many people, but remember that responsible use of credit (charge only what you’ll pay in full and on time) significantly helps credit profiles and scores,” Peterson said.
The Better Resolution: ‘I’m Going To Review My Credit Cards and Keep the Ones With Positive Payment History’
“Think very, very carefully before closing a long-standing account (with a positive payment history). Instead, put the card away in a safe place if you really want to avoid using it,” Peterson said. “The longer you hold an account (with a positive payment history), the more valuable it is in credit score determination. If you do not wish to use a particular credit card at some point, it can be a good idea to store the card itself away in a safe place — but think very carefully before closing the actual account.”
Bad Resolution 6: ‘I’m Tackling All My Debt’
“While there’s no shortage of financial shortcomings that many Americans face, it’s easy to try and tackle too much,” said Joe Buhrmann, manager of financial planning support at Country Financial. “Many face uphill battles with paying down debt, improving their credit history, rebuilding emergency funds and saving for retirement or a college education. It’s easy to point out our shortcomings and try and do too much at once. It may be factual, but it can also be disheartening.”
The Better Resolution: ‘I’m Going To Take Baby Steps To Pay Down Debt — and Celebrate Each One’
“Small steps, given time, can become part of your financial security and improve your financial fitness,” Buhrmann said. “Geologists tell us that the water cascading over Niagara Falls has eroded the bedrock over millennia and that the falls have gradually moved upstream several miles. While the changes we’re suggesting aren’t as impressive as the Niagara River surging over the falls, it’s a testament to perseverance and that water, given time, can wear down the toughest rock. Similarly, small changes, given time, can move you and your family from a position of insecurity to a position of security and lead you to better weather whatever comes your way in .”
“If repaying debt is your goal, start first by organizing your debt – to whom, how much, the interest rate and the monthly payments,” Buhrmann continued. “Then, take a break. Reward yourself for that. Later, pick one to tackle. Increase your payment slightly – perhaps round up to the nearest multiple. If your payment is $179 per month, round up to $200. Celebrate. Gradually increase the payments as you get accustomed, just as you’d gradually add weight to your lifts at the fitness center as you become stronger and more accustomed to the exercise. Pick another and contact the financial institution – ask for a lower rate. Many will lower the rate simply by asking. Celebrate again.”
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