I’m a Financial Planner: 3 Money Resolutions That Usually Fail — And 3 That Stick
Written by
Nicole B. Simpson, CFP
Edited by
Carly Brashears
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The new year is here, and many people will set money resolutions to improve their financial journey. Yet after the first month, many find themselves faltering on those goals. And soon enough, those resolutions become a distant memory only to be revisited the following year.
However, that doesn’t have to be the case. To stay committed to your financial resolutions, you have to come up with a plan that you can stick to and know the things that may prevent you from achieving those goals. Here are three primary reasons why your money resolutions fail, along with strategies you can employ for optimal success in 2024.
Why Money Resolutions Fail
You Set a Goal But Did Not Have a Strategy To Achieve It
Deciding you’re going to save a certain amount of money without critically reviewing your budget or seeing how you are going to achieve the goal contributes to failure. Before setting the goal, you should evaluate how much you saved the previous year. Was it a year of financial hardship? Did you have any financial circumstances that changed that will give you the confidence to believe this year will be different?
Reflecting on the year that you had can help give you great structure for the year to come. If you fail to plan, you are inadvertently planning to fail.
Life Circumstances Change
Financial resolutions can be profoundly impacted by life circumstances. A person may lose their job, have an unexpected illness or experience another significant event that impacts their monetary decisions. Other factors that are often overlooked include the impact inflation can have on your savings and spending. The CPI is a key barometer of inflation, and in 2023, inflation hovered at 3.24%. In 2022, it was 8.00%, in 2021 4.70% and in 2020 1.2%. If you worked at the same company with an average annual pay increase, your standard of living can be drastically impacted by inflation, causing you to struggle with implementing a new savings strategy.
Lack of Discipline
A commitment to savings requires a mindset adjustment before you can achieve the goal. When an individual has not done the basic research to identify their current spending habits, they are less inclined to change their standard of living to set aside resources for savings. Do not fret, there are ways to create and achieve the money resolutions you desire in 2024 and beyond.
Steps To Take Toward Financial Freedom
Here are three steps to begin your journey toward financial freedom.
Reflect on Your Money Habits
Reflect upon your money habits historically and identify areas where you can make monetary adjustments.
The first step to successfully achieving a financial resolution is to determine where you are spending your money and what financial adjustments can you make. Pull the last three months of your bank statements to identify where your money is being spent. Are you going to the store and taking out additional money? Are there any habits you are willing to curtail or monitor? With that in mind, create a realistic budget. Now that you are aware of your discretionary spending, you can make the financial adjustments to achieve the financial goal.
Set Your Goals
Set measurable, specific financial resolutions with an accompanying strategy.
Most people seek to save X amount of dollars each pay period to hit their target number. Consider additional factors. First, does the savings have to be with after-tax dollars? Consider increasing your retirement savings through your employer. That money is pre-tax and can be counted towards the goal. Second, can you set aside a lump sum during tax season? Based on the overall goal, if you generally receive a refund check, set aside some of the refund towards your financial goal. Finally, count your pay periods and calculate the exact amount you need to set aside.
Have Accountability
Find a financial ally that will hold you accountable.
If you are truly committed to continually achieving financial resolutions, it is best to work with an advisor. Today, many firms offer free financial planning consultations where advisors will provide you with options that best meet your financial objectives.
If that appears too advanced for your personal preference, consider asking close friends and relatives within your social circle. Challenge them to take the journey with you. Any opportunity to talk about money strategies with the people you engage with regularly can serve to be beneficial over time for all parties involved.
Editor’s note: Dr. Nicole B. Simpson is a dedicated certified financial planner board member of the CFP Board Center for Financial Planning Diversity Advisory Group and Chair of the Generation X Community Association.
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