Financial Resolutions and How to Achieve Them in the New Year

According to a Fidelity Investments Survey, only 27 percent of respondents indicated they would make a financial resolution for the new year ahead.

I don't know about you, but 27 percent seems kinda low. Ken Hevert, senior vice president of Retirement at Fidelity believes financial resolutions are on the decline because many people are feeling better about their financial situation and are generally optimistic about what 2018 will bring.

I'm usually optimistic about my future and what it will hold, but I also know that life is full of ups and downs. No crystal ball can tell us for sure what will happen in the future, that's why no matter what kind of situation you're in, keeping a steady pace toward financial goals will ensure you can get through the good and the bad.

According to the study, the top picks among those considering a financial resolution are saving more money, paying off debt, and spending less. These are all great financial goals to have, but the big question is, how do you achieve them?

Most people think about achieving goals around the new year, not actual resolutions. Yes, there is a big difference. Goals relate to specific achievements. Resolutions relate more to life-long permanent changes. You continue to work on resolutions every day, not just until a particular achievement is reached.

• Read: 3 Ways to Prepare Your Finances for the New Year

Before sitting down and thinking about what you want for the new year, you need to decide which changes in your life will be attainable goals and which will be more permanent solutions.

Goals can be rewarding when you achieve them, but they can also lead to discouragement if you don't reach them on time. It might take you longer than you expected to save $3,000 for a vacation or to pay off all of your credit card debt. And what happens when you actually reach your goal? What if you do end up saving $3000 for that family vacation? What now – do you stop saving money? Do you start saving for something else?

Resolutions work a little bit differently. Your expectations are different. Every day, you try living up to your resolution. If your New Year's resolution is to be better at saving money, sometimes you succeed, and sometimes you fail. Every day is a new day and a fresh opportunity to do better than yesterday. You really never expect to be done with your resolutions, so it's easier not to get discouraged when you don't achieve them right away.

My point here is that's OK to have both, resolutions and goals. In fact, I encourage it. Saving more, paying off debt and spending less are all great resolutions, but you will be more successful if you create goals that will lead you to achieve those resolutions. Think of them as baby steps. Actions steps. What actions will you take to complete your financial New Year's resolutions?

SAVE YOUR CHANGE

Are you laughing right now? Thinking that saving only your change will somehow get you to your savings goal. I started collecting all of my change just six short months ago, and already have over $420 in my collection jar.

I use the cash envelope method for all of my variable expenses such as gas, groceries, eating out, household items, and entertainment. When I spend money from my envelope, I always have change left over. Six months ago, I decided I was tired of carrying my change around, so I started putting it in a jar when I got back from my shopping trip. This made my envelopes lighter, and it was easier only keeping bills when I was ready to check out at the store.

If your New Year's resolution is to be better at saving, this is an easy and painless way to do it. Any time you pay for things in cash, only plan on spending whole dollar amounts. For example, if you go to the store and spend $15.25 on lunch items, pay $16 in cash and pocket the change. The first thing you should do when you get home is throw your change in a change jar (I use a mason jar from Hobby Lobby). If you're using the cashless budget method, you can still save your change. Debit cards like the one you can get through Acorns, will automatically invest your spare change.

At the end of every month, or every couple of months, bring it to the bank and put it into a savings account. If you have investment accounts, such as Non-Qualified accounts, use your change and benefit from a “usually” higher rate of return. Use the money to pay off debt or to save for that family vacation.

• Read: How Spare Change is Helping Me Teach My Son About Money

INCREASE YOUR 401(k) CONTRIBUTIONS

If your employer offers a 401(k), now is the time to think about increasing your contributions, or even maximizing them. As of right now, the 2018 contribution limits are $18,500 if you are under the age of 50, and $24,500 if you over the age of 50. If you are over the age of 50, you are allowed what's called a “catch-up” contribution of $6,000.

An Employer-sponsored 401(k) has better annual contribution limits compared to IRAs (can't exceed $5,500 if under the age of 50), maximizing your 401(k) and could be the perfect way to get back on track for retirement savings.

• How are you investing with your 401(k)? Get a free analysis of your 401(k) from Blooom.

I know this is the boring stuff but stick with me. Most employers offer to match a percentage of your annual wages in an employer-sponsored 401(k), 3 percent being reasonably common. I ALWAYS suggest that you put in at least what your employer is willing to match. If you don't, it's like throwing away free money. It's like telling your boss, “no, I don't want a raise.” If they are offering, take it.

If you haven't already, one of the action steps you should take is figuring out what your 401(k) plan offers and how much you are contributing. Based on what you find out, make it a goal to at least contribute what they are willing to match. If you already are taking full advantage of your employer's match, make it a goal to increase your contribution by 1 percent. If you are close to the annual contribution limit, make it a goal to maximize your contribution.

• Read: How to Save for Retirement When You're Self-Employed

SET UP AN AUTOMATIC SAVINGS PLAN (ASP)

The easiest way to save more money is to do so without thinking about it. It's easy to derail your savings goals if you keep on forgetting to put money into your savings account every month, or spending it before you get the chance to do it.

There are a couple of ways you can put your savings on auto-pilot. One of those ways is merely setting up an automatic transfer from your checking account to your savings account at your bank. I have mine set up to happen the day after I get paid. For me, I get paid twice a month, on the 5th and the 20th. On the 6th and 21st, I have $25 transferred from my checking account to my savings account. It's simple, doesn't give me time to spend it, and I always keep it at a realistic amount.

Make sure to check with your bank about transfer limits. I know there are some banks out there that only allow you to do this a certain amount of times every month. If you exceed those limits, they charge a fee. Just a heads up to make sure you check with your bank before setting this up.

The second way you can take action is by setting up an automatic payment to your brokerage account. If you have an account with a Broker that is invested, you could simply set up an ASP with your broker or bank that would automatically withdrawal a specific dollar amount each week, every month, or on a time frame that works for you.

The way I do it is a little bit different. I have the accountant that does our payroll at work send a check every payday to my broker. It allows me to save automatically, and the money is already taken out of my paycheck before I see it, so I know I won't spend it. It forces me to save.

• Read: How to Use Automatic Payments Without Racking Up Overdraft Fees

CREATE AND STICK TO A BUDGET

Formulating and sticking to a realistic budget is an excellent New Year's resolution. Without one, you will never know your cash flow, or how much disposable income you have to put towards saving or paying off debt. Pretty important, right?

This is where setting specific, measurable, achievable, and REALISTIC goals come in handy. You will never be able to stick to a budget if it's continually letting you down and filling you with disappointment. That just makes it frustrating. I know, I have been there.

Some of the goals you might want to set are:

• Evaluating your budget every month and adjusting for any life changes.
• Find a budgeting system that works for your family.
• Having monthly budgeting meetings with your significant other or spouse.
• Prioritize your spending so you can spend your money on what's important.

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FIGURE OUT A DEBT PAYMENT PLAN

Getting out of debt is a huge goal. Sometimes the process can take years depending on your overall debt burden. One of the things that made me so angry when I realized how bad my debt had gotten was that any money I could have saved or put towards something that really mattered was negated by all of the payments I had to make to pay it off.

One of the actions you can take in the new year is figuring out your overall debt story. This means knowing exactly how much you owe, who you owe it to, how much interest you are paying for each debt, what the minimum payments are, and when they are due.

Whew. Your debt story consists of knowing a lot.

But you can't start a debt payoff plan if you can't see the whole picture. Once you know exactly what you're dealing with (and it might be a slap in the face), you can start creating a plan to pay it off.

There are many ways to pay down debt. Start by looking into the Snowball Method, which keeps you motivated with proof of progress. You pay off your smaller debts first, no matter what the interest rates are.

You should also look into the Avalanche Method. Also known as debt stacking, this plan targets the debts with the highest interest rates first.

I have used both. I used the debt Snowball Method when I had a bunch of smaller debts. A few hundred dollars on one credit card, a couple of hundred dollars on the other. From a nerdy, practical point of view, I like using the Avalanche Method the most. It allows you to repay your debts in the shortest amount of time and will save you the most money on interest.

No matter what type of plan you use, the action you must take is picking one, starting it, and then sticking to it.

• Read: How to Create a Plan to Pay Off Debt

BUY ONLY GENERIC BRANDS

If you want to spend less this year, one goal I have been working towards is buying only generic brands. I'm not going to lie; I gravitate towards more prominent name brands. I always have. In fact, it is a big reason why I got into debt in the first place. If I wanted a coat, it couldn't be just any coat. It had to be a North Face or Patagonia coat. See my point?

The same holds true in the grocery store. When I went grocery shopping, I naturally bought brand names I recognized as being “better.” Since starting my “generic brand” goal, I have cut back spending significantly. It's incredible how much you can save by just making one small change to the way you shop for groceries.

So, the next time you are in the store, take action and think about what you're buying. Does the Hunt's Spaghetti sauce really taste better than the Safeway brand? There is only one way to find out. You might be surprised. I have found that I actually like some of the “no-name” brands a lot more.

For the new year, don't just say you want to spend less or pay off debt. Create real, actionable steps on how you can get there. You are more likely to succeed and feel better about your financial picture when you can create a plan that lets you see progress but also gives you a bigger resolution to work toward.

What are your financial New Year's resolutions? I would love to read about them in the comments below!