By Adam Mack, J.D.Hillary Stirling, Research Assistant.When they hear “New Year’s Resolutions” the first thing most people think of is weight loss or working out, but in terms of the most common resolutions, financial goals are right up there, higher on the list than quitting smoking or even spending more time with family and friends. As a Kansas bankruptcy attorney, I thought I’d share with you some tips on how to keep those financial New Year’s Resolutions.
Know Your FinancesFirst, know where you are. It’s hard to know where you want to end up if you don’t know where you are now financially. Start by figuring out what your current expenses and income are. To do that, I recommend looking at three typical months rather than October through December (when people are generally spending more than usual). July through September of the previous year is usually a good starting point. Write down how much you spend on EVERYTHING. Most people think of the typical bills like housing, heat, electricity, car payment, phone, etc., but don’t forget the little things like dining out (this includes your morning latte), personal care (manicures, barbers, etc.), and expenses related to pets. Also don’t forget to include annual expenses such as license and registration of vehicles. Software that tracks your personal spending can help out with this step a lot, and there are some great free programs out there if Quicken or something similar is out of your price range. Your bank or credit union may even offer free or discounted tracking and budgeting tools.
Know What You WantSecond, be specific. Something like “spend less, save more” is almost never going to lead to real financial change in your life. This is because it’s too generic. What constitutes “less” or “more?” Instead, set a goal to transfer a set amount, even if it’s just $10 per paycheck, into a savings account for a savings goal. For a spend-less goal, look at the list you made in the first step and choose to spend $10 less per month on clothing or choose to eat in a few more times per month. With a specific goal you’ll know whether you’re accomplishing it or not.
Know YourselfThird, be realistic. You’ve completed the first step and have made specific goals, so you know where you are now and where you want to end up. The next step is to evaluate how likely you are to accomplish those goals. Say you eat out on average 8 times per month, and the math shows you have $50 left after every paycheck. You could resolve to eat out only once a month and deposit all the money you saved by eating in into a savings account, but chances are you wouldn’t make it a month with such drastic resolutions. Far better is to have a spectrum of goals (definitely-doable, medium, and stretch) that will allow for the natural ebb and flow of life. You could resolve to save $25 per paycheck and then any remaining funds (and ONLY those remaining funds) could be “Petty Cash” so you don’t feel broke all the time. Money saved from not eating out would also go into a savings account – doubling, tripling or more the amount you’re saving. Your stretch goal could be eating out once a month, the medium goal would be 4 times per month, and the definitely-doable goal would be 7 times per month. That way, any progress is recognized as progress.
Know Where Your Money Is GoingFourth, track your success. So you decide to put $25 per paycheck into savings and to eat out only 4 times per month instead of 8. If you don’t remember to transfer the money into savings or if you don’t keep track of how many times you’ve eaten out, you won’t succeed. Find a way that works for you to track your goals, such as setting up an automatic transfer for your savings or recording it on a calendar whenever you eat out.
Know How to Keep A SecretFifth, don’t share your goals but do share your successes. Research going back more than 80 years has shown that people who tell others about their goals while still in the planning stage are less likely to achieve them. Once your goals are in motion and you’re seeing success from them, however, sharing those successes helps build the momentum and excitement that will keep them rolling forward.
Know Your OptionsFinally, sometimes people get half-way through the first step and feel discouraged because they realize their expenses far exceed their income. If you find yourself in that situation, do NOT give up on your financial resolutions! There are options – including bankruptcy – that can help you get your financial house in order and even give you a fresh start for the New Year. Contact us today to find out how we can help you get back on track for your financial goals!
These articles are for general informational use and do not constitute legal advice. Since laws change over time, it’s possible some articles are out of date and for that reason, we make no representation that the articles are fully accurate. For actual, up-to-date legal advice (including a free consultation), please contact us!