Happy New Year!!!
With the new year comes a flurry of New Year’s Resolutions. Year after year, along with losing weight and quitting smoking, improving your finances is one of the most common resolutions. And year after year, by mid-January or so, gym memberships start going unused, and most people abandon any hope of actually living up to those resolutions.
So – is this year going to be different?
If you want to set yourself up for success, there are a number of things you should consider:
- Be precise : When setting a goal, your odds of success are going to be much better if you start of with a clear idea of exactly where you’re starting from, and exactly what the finish-line looks like. In finances, your starting point includes four different things : what financial assets do you have (money, or stuff you could turn into money)? what financial obligations do you have (this includes all debts, and also includes all contracts that you’re locked into in which you pay a monthly amount, and which have a penalty if you want to break the contract)? what is your income (from all sources)? what are your expenses (this includes frequent expenses like groceries, rent, and gas for your car, and also includes longer-term expenses – things you pay every few months, or once a year…). And for the finish-line : what does ‘success’ look like? Something along the lines of ‘credit-card debt paid off in full by ??? date‘? If so, I’d recommend adding ‘without incurring additional debt elsewhere’. Just to be clear. For example, if you take out a consolidation loan (or borrow money from the Bank of Mom & Dad) to pay off all your credit cards, you still owe the money. You’ve decreased the amount of interest you’ll be paying (which is great !), but the debt still exists.
- Short-term goals : These days, people have relatively short attention spans. Setting a results-oriented goal that won’t be completed for many months (or a year, or more) – like losing 20 pounds, or paying off $20000 in credit card debt – may move too slowly. It will seem so far away, and like the progress you’re making is so slow, that you may get discouraged and give up. So – break your goal down into mini-goals, specific goals with target dates no more than one month out. If you’re paying off $20000 in debt, then set a mini-goal of accumulating the first $1000 (or $500. or $250…) by the end of January. Then, at the end of January, evaluate your progress. Did you easily manage to achieve that goal? Maybe your goal for February should be a little more ambitious. Did you fall short? Set a more achievable target for the next month. Success will be much more motivational than failure (for most people).
- Have a plan : In long distance running, there’s a saying “Plan your run, and run your plan”. Basically, once you’ve identified your goal, come up with a plan that will (should) help you to reach that goal, and then follow that plan. If your mini-goal is to put $500 toward your debt this month, your odds of meeting that goal are much better if you decide in advance exactly how you’ll do that. Drink the nasty coffee at the office (who knows, maybe it isn’t that bad), instead of stopping by Starbucks every morning – $100. Bring a bag lunch (or leftovers from home) instead of going out for lunch, 3 times each week – $100. Cancel cable-tv, and subscribe to netflix (or some equivalent) – $50…And, face it, there’s only so much money you can save by spending less, so consider the flip-side – what are some ways you could earn additional money and pay off that debt even faster? Check out my recent post on additional streams of income.
- Identify potential obstacles : Chances are you may have done this before – tried to pay off debt. And failed. Think back – what obstacles came up that contributed to that failure? What obstacles could come up this time? Plan for these as well. With money, one of the key obstacles is often friends and family. Friends invite you to go out drinking on Friday – from past experience you know that this is apt to put you back by $100 or more. So, is there some way you can get your friends and family on-side? Tell them (or just some of them, the ones that you know will support you in this, and cheer you on with each victory) what you’re trying to do. It’ll help!
- Up the ante : Have you got any ‘skin in the game’? Achieving your goal may be reward enough, but what can you do to ‘up the ante’? My dad and his hockey buddies used to have weight-loss pools every so often. Each of them would put $100 or so into the pot, and it would be divided between the guys who successfully reached their weight goal (or, if no-one did, the guy who came closest). This gave them all added (financial) incentive to stay on track with their weight-loss plans, AND it gave them each a support team (which may have mostly looked like good-natured teasing every time one of them caught another grabbing a burger at McDonalds or a donut at Tim Hortons).
Bear in mind that there are two kinds of goals – results-oriented goals (on July 1, I will run a marathon in under four hours) and action-oriented goals (each week, I will run 4 times: interval training, tempo training, short-distance, LSD; distances will increase each week according to a pre-determined schedule). While you may not be able to guarantee the result, you have complete control over the actions. So plan your actions carefully, and the result will follow.
One thing you could do to keep you on track, focussed on the goal, and taking consistent actions toward achieving it is – enlist the help of a money coach. Interested? Give me a call and we can arrange a FREE session to see if we would be a good match.