Hope And Money
The Merriam-Webster dictionary defines "optimistic" as "having or showing hope for the future." So when the new year rolls around, we expect good things to happen. We wish to leave last year's challenges behind and start fresh with a clean slate. The tradition of New Year's Resolutions dates back to ancient Babylonians who would make promises at the beginning of the planting season to pay back debts or return borrowed objects. Goals today are more personal and reflect our desires to be better.
Are New Year's Resolutions Worthwhile?
A 2021 study published in the International Journal of Environmental Research and Public Health revealed that most people abandon their New Year resolutions within the first month. However, those who make financial resolutions are more likely to succeed in their goals. According to Fidelity's 2022 Financial Resolutions Study, 71% of participants stuck to their financial plans last year, compared to only 58% in 2020.
Types Of Goals
Despite the success rate of financial goals, the most popular New Year's resolution, as indicated by the Fidelity study, is general well-being (i.e., sleep, self-care, personal relationships), followed by physical health (71%), financial (68%), mental health (61%).
The top three financial goals are:
- Saving money (43%)
- Pay down debt (41%)
- Spend less money (31%)
Keys To Success
More than half the study participants reported setting the same or similar resolutions as in the past year. These findings suggest that New Year resolutions often reflect "rebooted" each year. So, if you find your goals in an endless cycle, here are some suggestions to help you succeed in 2022.
- Be Practical: Consider a more conservative goal rather than what is ideal. Then, once you make a small change and stick with it, you can establish a new objective. For example, if you are not saving anything for retirement now, contributing the maximum might be ideal, but starting with $100 per month might be more realistic.
- Be Specific: Rather than saying you want to spend less in 2022, create a budget and try to stick to it. Determine your current monthly spending by looking at credit card or bank statements. Determine your non-discretionary expenditures (housing, insurance, debt payments), and subtract that amount from your income. Then, choose a category of spending to reduce. If a significant amount of your discretionary money goes to dining out, you could resolve to cook more dinners at home.
- Be Flexible: You are more likely to abandon your new year's resolutions if you don't allow some margin for slip-ups. If a financial setback occurs, you may need to adjust your goals. For example, if you are saving for a vacation, you may need to redirect your short-term savings to replenish your emergency fund.
- Be Consistent: Creating regular routines around your New Year's resolution helps develop habits. If your goal is saving more, then automate the savings. Request that a portion of your paycheck automatically goes to a savings account through direct deposit or auto-transfer from your checking account. You also will be less likely to spend money if you do not see it in your checking account.
Do you have financial goals that you keep making every year but fail to achieve? If so, make this the year you will finally resolve to accomplish those objectives and ask for help if you need it. For two decades, the Hurlow Wealth Management Group professionals have helped clients plan financially in a thoughtful and personalized way. Schedule an introductory call to get started today and turn your optimistic goal into a confident plan.