A new year is upon us. Over the past few days, people across the world have launched into resolutions and goals they plan to achieve during 2019. Unfortunately, around 80% of these people will have given up on their resolutions by February.
We’re not trying to sound cynical. Goals can be a healthy and positive thing in your life. You should have goals. But having goals isn’t enough. In fact, sometimes goals can do more harm than good.
The Problem with Goals
Outside of fitness and weight loss, financial goals are probably the most common resolutions that people set at the start of the year. Deciding to get financially healthy is a great decision, but the resolutions people set aren’t always the best.
“I want to spend less money on things I don’t need,” one person might say.
“I’m going to pay off $200,000 of debt this year,” says another.
The problem with the first goal is that it’s too vague. How much money did you spend last year? How much less will you spend this year? How will you go about spending less money? There are no clear, measurable bench marks or actionable steps.
As for the second statement, it’s probably too ambitious for the vast majority of people. Soon, you’ll find yourself overwhelmed by the impossibility, and you’ll give up altogether.
If you really want to improve your financial health, you’ll need to build positive money habits. How you spend your money isn’t a temporary action. It’s a lifestyle.
Creating Positive Financial Habits So You Can Achieve Your Money Goals
A goal often feels like a far off, seemingly impossible point. A habit, however, starts off with a singular action that’s immediately doable, providing you with a sense of accomplishment and progress. The trick is to start small.
Pick an action that you know you can do, no matter what. It might be as simple as putting $5 into a savings account every week. It might seem insignificant, but habits are like a muscle. You can’t jump immediately into heavy lifting, or you’ll hurt yourself and get discouraged.
Instead, you start small and work your way up. Once you’re ready to flex those financial muscles a little more, we have a few suggestions of how to do it.
Paying More Than the Minimum
Whether you have student loans, a mortgage, credit cards, or something else, it’s always tempting to pay the bare minimum. This is never a healthy financial strategy, especially for debt that has a high interest rate.
Loan periods can stretch out for a very long time, leaving you to pay double the original cost thanks to interest.
One thing you can start doing is paying more than the minimum every month. Once again, start small. Maybe you just pay $20 more. This will add up overtime, saving you a lot in interest and getting you out of debt faster.
Pay Your Credit Cards Off Every Month
Credit card debt is often a slow death. You make more and more purchases until suddenly, it’s at an amount you couldn’t pay off if you wanted to. Then the fees and interest kick in, causing you to constantly lose money.
Credit cards are great for building credit, earning points, and when absolutely necessary, covering an emergency. But you should never keep money on them constantly.
Before you can get into the habit of paying off your credit cards every month, you might need to pay down a sizable amount. The best way to tackle this is to take them out of your wallet and leave them at home until they’re paid for.
Don’t use them at the store. Don’t use them online. Don’t touch your credit cards until they’re down to zero, and then, begin the habit of always paying them off.
Ask Yourself, “Do I Really Need It?”
This isn’t a fun habit, but for those who find themselves losing money to impulse buys, it’s critical. Whenever you’re making a non-essential purchase, get into the habit of checking yourself and asking whether or not you actually need it right now.
Think about the other purchases you’ve recently made. Remember the goals you’ve set and how this will affect your progress towards them. In an age of online shopping and free shipping, it’s very easy to buy something without stopping to think about it.
Once you force yourself to start thinking about it, you’ll find you usually have the power to stop yourself before it’s too late.
That doesn’t mean you can’t spend any money. Rewards are actually an important part of the psychological development process. If you’ve been successfully keeping up with your habits, and you’ve been looking to buy something for a while, go ahead and treat yourself.
This can actually be a great way to utilize goals. Set a checkpoint for your progress, and when you reach it, indulge in a reward.
Just make sure it isn’t something that plunges you back into debt.
Committing and Creating Accountability
Study after study has shown that accountability and external commitment greatly increase your chances of achieving your goals. Let’s say you plan to go to the gym at 6am. The morning comes. Your alarm goes off. Suddenly, you’re fighting against your sleepy subconscious, and it’s very easy to stay in bed an extra hour.
But, if you make plans to meet your friend at the gym at 6am, suddenly you have a commitment you’re held accountable too. This makes it considerably harder to justify staying in bed, and most likely, you’ll find yourself at the gym.
The same is true for financial habits.
One of the best ways to stay committed and establish accountability is with a financial advisor. A person is much more likely to stay on track when they’re financially invested in something. A financial advisor also makes it easier for you to get financial healthy, helping you develop strategies to achieve your goals.
After a conversation or two, you’ll start to realize your financial goals aren’t impossible and your money habits can change. And once you’ve paid off your debts, and you find yourself with extra money at the end of the month, they can help you grow that into wealth and stability you once could only dream of.
For financial planning in Springfield, Ohio, talk with the team members of KB&P Financial Partners. Our experienced team can help you develop the financial habits needed to transformer your future.