Whether you have been trying to budget better for a while or this is the first year you’ve started to focus on your financial health, implementing financial New Year’s resolutions can be an excellent way to get your money-saving back on track. Without proper organization or guidance from your financial planner Orlando though, financial resolutions can easily become failed attempts that lead to stress and frustration. Below are a few popular resolutions that just don’t seem to workout for anyone, and the alternative options you should utilize instead.
Setting Broad or Unrealistic Goals
Saving money is a good idea, but without financially specific goals, it quickly becomes very difficult to save “just to save.” It is very easy to lose momentum, or encounter an obstacle and be forced to adjust the way you save. Without a strategy, a roadblock often equates to a shut down in saving altogether.
Instead, calculate how much money you are realistically able to save each month, no matter what your expenses are. Then put that money away first, before you deal with your discretionary expenses. If you don’t have a specific number in mind, you’ll find yourself tempted to save only what is left over, which probably won’t be a sufficient amount if you aren’t conscientiously spending each month.
Eliminate All Discretionary Spending
Just like when you try to cut out all sweets from your diet, halting all discretionary spending can easily backfire. Trying to stop all “voluntary” spending can even cause a rebellious spending spree in some. Because even though we’re making our own rules, it can still be challenging and frustrating to try and abide by them, especially when there is minimal flexibility.
Instead, prioritize your budget and set aside a small “splurge fund.” This will let you focus on your financial resolutions while also allowing you some small spending freedom when you need it. You want to avoid feeling completely deprived, and setting aside a small bit of the 25%-35% of your remaining income will be good for your finances and your mental health.
If you’ve decided to tackle your financial future on your own, you may find yourself struggling fast. Without someone else holding you accountable on your financial journey, it will be very easy to lose focus, and miss savings goals.
Instead, work with your best friend, partner or spouse. Financial transparency helps relationships and wallets. If you’re a parent you’re already aware of how good your children are at bothering you. You can channel that energy by putting it to better use and have the kids help you stick to the savings goals. It’s great to start financial literacy at a young age as well. Truthfully though, the best choice is probably a financial professional. Maybe your CPA, but I recommend using your financial advisor. They can amend a plan you’ve already made, or help you budget from square one. They literally do that every day, so there’s no one better qualified, and if/when circumstances in your life change, they’ll help you adjust your strategy so you can achieve your goals.
Maxing Out Retirement Contributions
Traditionally we have been told to start saving early and often for retirement, and whenever possible, max out the yearly contribution. There’s one big problem with this plan though; if you are forced to live paycheck to paycheck because you max out your retirement contribution, there’s a high probability that you start to accrue high interest debt when dealing with normal financial emergencies.
Instead, prioritize contributing to an emergency fund and try to cut some monthly expenses wherever possible. Then, calculate how much you can truly afford to contribute to your retirement and start investing or contributing using those numbers. This is another great opportunity to seek professional guidance and advice also.
It’s a new year and maybe a new you, and you should be proud of yourself for recognizing the need to focus on financial health. You’ve already started the year with the right mindset, now do yourself a favor and ensure your financial strategy will succeed this year. Don’t make the mistakes so many others make. Focus, build a plan, and go on your financial journey with someone there to help along the way.