Money Resolutions for 2017

The New Year is a time in which people feel that they can start fresh with their lives. They try and put the events and the bad habits of the previous year behind them, setting new goals to improve their life in the year ahead.

So what are the most common New Year's resolutions? Here's a chart of the most popular resolutions:

Top New Year's Resolutions

Source: Nielsen

The bulk of resolutions tend to be about self-improvement or health-related goals, but it's interesting that 34% of resolutions are related to money and finances; that's over a third of resolutions (Statistic Brain). With money being top of mind heading into the New Year, what are some good goals to shoot for? Here are 4 of my favorites below:

1. Spend Less Than You Make

This may sound so simple and you may be tempted to skip this one. Don't. You may think you are shelling out less dough than you're bringing in, you may even be pretty sure, but do you KNOW? 

The most common financial issue I see in individuals and couples is living beyond their means. Their bank account is like a tub full of water that they draw from, not being cognizant of what is going in, nor how much is going out. The only thing they pay attention to is the water line, or their account balance, only changing their behavior when the water drops too low. 

The time to change your activity and spending is not after your bank account gets shallow, but before.

2017 is the year to start tracking your spending. I don't care if you're young and you've never seen a comma in your bank account balance or if you're well-established with $80,000 in your checking account, you need to be tracking your spending. As you make more money, your need to track spending doesn't diminish, it actually grows. Your bad spending habits may just take longer to notice, and the longer it takes you to notice, the more ingrained you will be in your habits. You can never out-earn your desire to spend.

There are plenty of ways to track your spending. You can use pen and paper, a computer spreadsheet, checkbooks, or my personal favorite, software. I use Mint as a tool to see my spending habits and to get a clear picture of my cash inflows vs outflows. Whatever tool you use, make sure it's something you will stick with.

2. Get Out of Debt

Many times poor spending leads to poor financial commitments in the form of excessive debt. Feeling like you spent too much money last month is one form of stress, but drowning in debt that you feel you can't afford is a whole different level of anxiety. The only thing that makes that anxiety worse is not having a plan.

To make a plan for aggressively tackling your debt problem requires a bit of planning. To make a plan, you need to start with goal #1, tracking your spending. To know how much money you can throw at your debts, you have to know what your fixed expenses are. You can't just ignore your rent, mortgage, utility bills, food, minimum payments, etc. Know what your fixed expenses are and whatever is left is discretionary. People underestimate the amount of discipline it takes to dig yourself out of debt. Don't take it lightly. You will almost certainly have to cut back in areas in order to more aggressively pay off your debt, but it's worth it.

What about where you should allocate those extra dollars

Pay at least the minimum payment on every debt. From there, rank your debts by their interest rate (highest to lowest). Focus all your additional money on the highest interest rate debts FIRST. In doing this, you can make sure that you are paying the least amount in interest over the life of your debts. 

3. Increase Your Contributions

71% of Americans say that they do not have enough saved for retirement (Experian). 

The amount you will have for retirement depends on 3 main factors:

  1. How much you save
  2. How long it is invested for
  3. Your rate of return

You really only have complete control at any given time over one of these factors: how much you are saving. Yes, you can start saving as soon as possible, but you cannot go back and make up for lost time, and outside of your investment allocation, you really can't control your rate of return.

The common thread of all the goals so far is discipline. Saving for the future is a lot like taking vitamins; you don't really see the need now, but you know that your future health depends largely on the right balance of nutrients in your body.

4. Put Your Money Where Your Heart Is

Poor management of your money and resources doesn't just impact you. It impacts the things you value as well. Billy Graham once said, "Give me five minutes with a person's checkbook, and I will tell you where their heart is."

Spending more than you make? Drowning in debt? Penny-pinching because you didn't save enough for retirement? All of these impact your financial generosity towards the people and causes you care about. Take 2017 and re-evaluate how serious you are about your giving to your church, supporting the causes you care about, and most of all, your friends and family.

Happy New Year and as always, feel free to reach out with any questions or comments.