‘Tis the season to create New Year’s resolutions. Unfortunately, 80% fail at achieving their resolutions. Despite this alarming statistic, the tradition of making and sharing “firm decisions to do or not do something” is still the popular activity in preparation for the New Year.
As you begin visualizing and creating your vision boards, here are four financial New Year’s resolutions to avoid making and tips on how to create goals you can actually achieve.
Avoid These Financial New Year’s Resolutions
1. To Be Debt Free
The average American has about $40,000 in personal debt, with the average student loan debt of over $35,000, excluding mortgage debt. Debt freedom is an impressive goal to achieve in life. However, it usually takes longer than a year to accomplish this feat. It may take more time than anticipated to tackle the mountain of debt accumulated over numerous years or decades.
Instead of setting a vague debt freedom resolution, identify specific debt(s) or an amount to tackle and focus on paying off or down for the New Year. The accomplishment of paying off each debt will give you the encouragement you need to continue towards your journey to debt freedom, especially during rough financial times.
2. Cold Turkey Spending Cuts
The abrupt and complete manner of going “cold turkey” usually leaves people feeling deprived and defeated if they fail, especially for spenders. When this happens, many feel resentful and tend to cheat or “kill the turkey” altogether and splurge, thus overspending.
Instead of making the empty “cold turkey spending cuts” resolution, reduce excessive spending from every day down to a few days. Once you get used to minimizing your excessive spending behavior to only a few days, add a day or two more to your “spend less” days. You may find that you don’t need the things you were spending on as much as you thought.
You should also turn excessive spending into behaviors that will improve your financial situation. Eating out every day, for example, is the leading budget buster. Instead of eating out every day, meal prep your breakfast, dinner, or lunch for two to three days a week. Or, instead of hitting the vending machine at work, buy your favorite snacks or drinks in bulk and stash them at your desk. Every time you take a snack or drink from your stash, add the money you would have spent in a savings jar. When the jar is full, dump into a savings account or use some of it to splurge.
3. Insurmountable Savings Goal
Having hundreds of thousands of dollars saved for a rainy day, a fantastic vacation, or an excellent business opportunity is ideal. However, setting a savings goal of $100,000 in a year when your salary is $60,000 or less may be setting the bar a bit too high. If you don’t reach the goal, you may feel defeated. Having goals that are a challenge is great, but setting goals that may seem unattainable is emotionally dangerous.
Instead of setting insurmountable savings resolutions, set a SMART (specific, meaningful, attainable, realistic, and time-driven) amount that requires a positive change in behaviors and discipline. Start with a savings goal of at least $500 to $1,000 or one month’s worth of your salary. Once you accomplish that goal, set a new savings goal that will require more effort. A seemingly small savings goal can grow into a sizable cushion for your future and present financial freedom.
4. Quit Your Job to Start a Business
Hating your job is NOT a good reason to quit your job to start a business.
Not liking or not being satisfied with your job may mean you need to find a new job. However, if you want to start a business, keep your job during your entrepreneurial learning curve. Your job is the first corporate sponsor of your business. Your salary will not only pay the bills and sustain your lifestyle, but it will help you fund the necessary business startup, formation, and coaching expenses.
Instead of rushing to fire your boss to start a business resolution, start a side hustle. Become a “dualpreneur” (employee and entrepreneur). Leverage your job’s benefits and steady income flow while you develop your side gig into a profitable legitimate business that may ultimately surpass or replace your salary.
This article originally published on December 5, 2019.