3 Ways to Make Budgeting a Success in the New Year
At the end of each year – and the beginning of the new one – most of us think about things we’d like to accomplish in the coming year. It’s a time we engage in self-reflection, ideas for self-improvement, and new – or ongoing – resolutions and goals.
One of the most common resolutions is losing weight, but we all know how that goes: crowded gyms in early January, inevitable drop-off when February rolls around. In fact, a study done by the University of Scranton shows that only about 8% of people actually achieve their resolutions.
Financial resolutions often include starting – or finally sticking to – a budget. Unfortunately, that resolution is all-too-often hard to stick to as well. (For related reading, see Financial New Year’s Resolutions You Can Keep.)
Why do so many people have trouble sticking to their resolutions? One of the main reasons is having unrealistic expectations. Overconfidence doesn’t just affect fitness goals, it affects investors’ behavior as well.
How can you make this the year you stick to your goals?
Take Baby Steps
Be reasonable in assessing where you are with your finances and don’t try to tackle everything at once. Start by listing all the areas of your financial situation you would like to improve. Then prioritize the individual elements in order of importance to you, and start by taking on one or two at a time. (For related reading, see: Achieve Your Financial Goals With a Financial Plan.)
If one of your goals is to start – and stick to – budgeting, don’t give yourself super-strict boundaries. Instead, start by creating good habits one at a time. If you want to pay off all of your credit card debt, for instance, take a look at how much debt you have and create a realistic weekly or monthly plan to start paying it off. If you want to buy a house in five years, you could decide to spend less now on something that you currently enjoy. (For related reading, see: Got a Raise? Here’s How to Avoid Lifestyle Creep.)
Focus on one or two goals at a time, see how it goes, and make progress – and adjustments – to stay on track.
Be Specific
Instead of saying “I am going to save more this year,” or “I am going to save $5,000 this year,” try to specify exactly how you plan to do it. Start with something like: “I will take $100 from each paycheck and put it into a savings account.” By giving yourself a tangible – achievable – steps, you’ll be better able to track how well you are sticking to it.
In addition, try to think about what it is that you are trying to accomplish. Why do you want to save an extra $100 each paycheck? Are you saving up for a car? Trying to pay off debt? Building up an emergency fund? When you add purpose to your goals, it makes it more compelling and easier to accomplish. (For related reading, see: Why Investors Can Be Their Own Worst Enemy.)
Stay Accountable
Know yourself: accept who you are and what that means. Are you someone who might let things build up then feel too overwhelmed to jump back on track? Think about sharing your goals with a friend or family member and set times to check in with them and go over your progress. If you want to go to the gym three days a week, think about getting a workout partner. If you want to save an extra $100 from each paycheck, see if there is a friend that has the same goal and you can do it together, comparing how it’s going throughout the journey.
Most importantly, understand that this is a process. Some weeks will be better than others, but, if you can follow these three steps – set realistic goals, set specific goals, be accountable – hopefully you will be part of the 8% that gets it done this year. (For related reading, see: The Importance of Personal Finance Knowledge.)
To read more about budgeting:
Financial Budgeting and Saving
Should You Start to Save… or Pay Down Debt?
This article was originally published on Investopedia.com
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