5 Reasons Why Your New Year's Resolution Will Fail
After getting into better shape, becoming financially fit is the next top priority among Canadians making New Year’s resolutions this year.
That’s according to a recent Bank of Montreal poll, which found that 80 per cent of people are making some kind of vow to do better next year. Of those, 51 per cent put fitness at the top of the list while 36 per cent said they’ll focus on finances.
But we all know how the story goes: the follow-through on any given resolution usually falls apart by the end of January.
“One reason why many resolutions fail is often because the goals seem overwhelming, even daunting, and as a result unattainable.”
But just like making regular exercise a reality, there are plenty of ways to make financial intentions stick.
Surround yourself with supportive friends and family
“Make it clear to them that you’re setting financial goals or going to live off a budget and would welcome their moral support,” says Toronto’s Kurt Rosentreter, senior financial advisor at Manulife Securities Inc.
“If you’ve faced peer pressure to spend money [in the past], this approach can help to alleviate the stress of living with a tighter financial belt. Perhaps one of them will agree to go through the same exercise and you’ll have a buddy to lean on. So much of effective money management is psychological first and financial second.”
It might not sound like a great way to spend a Saturday night, but to make sense of your finances — and improve them — you need to pull everything together.
“Gather and file your wills, powers of attorney, insurance and investment portfolio documentation, including group plans, credit cards, recent tax returns, notices of assessment, et cetera, not only so that they’re easily located but so you can figure out which areas of your financial life need to be addressed,” Grouni says.
From there, create your own personal net-worth statement.
“It’s hard to figure out where you'll end up or have the incentive to stick to your goals if you don't know where you are to begin with,” she says. “Having a personal financial statement gives your goals context and a starting point, which increases the likelihood of sticking to them.”
Be specific and keep it real
As any personal trainer will tell you, you’ll have a lot more success reaching a goal when you say something like “I want to lose 15 pounds” rather than “I want to lose some weight.”
Same goes for finances. The more specific, the better.
“Identify what you wish to achieve — for instance, be debt-free by 2020 — and for each goal, determine the dollar cost to achieve it and the timeline to get there,” Rosentreter says. “Now that you have some goal posts, you’ll find it easier to focus on the goal and regularly measure progress towards it.”
To stay motivated, make those goals realistic. “If you calculate that you need to save $1,200 a month toward the retirement that you want and you cannot afford to save at that level, take it one step at a time and start with an amount you can afford,” Rosentreter says. “Perhaps this year you start by saving $500 a month and then increase the amount over time.”
Put your savings on auto-pilot
Pay yourself first by having an automatic withdrawal set up through your financial institution, withdrawals that will go to retirement, your child’s education, a down payment for a home, or whatever other goals you have mapped out for 2014.
Contribute to your group Registered Retirement Savings Plan (RRSP) if you have one, and bump up contributions to your pension plan, Grouni suggests.
“If you’re already contributing, make a resolution to contribute 1 per cent more than you already are,” she says.
Remember the big picture
“The point of setting financial resolutions is to keep you out of overwhelming debt and help you build a financial future that will give you more freedom, not less,” Grouni says.
“Think about how you want your future to be and remember that sticking to your resolutions will help you get there.”