New Years resolutions usually involve losing weight, quitting smoking, etc. Instead, this year use your resolutions to help put your financial house in order. Doing that won’t help you fit into that pair of skinny jeans or improve your breath, but it will fatten up your wallet and improve your financial outlook. Here are five potential resolutions you can make for your family:
Go Without One Thing
Have each person in your family resolve to give up one indulgence in the coming year. These don’t have to be big things, but they need to be things that cost money. Examples might include chewing gum, an expensive brand of hair conditioner, the second daily cup of Starbucks coffee, driving to a destination that is easily walked to, playing the lottery, etc.
The sky is the limit here. The idea behind giving up one thing is that psychologically it is more effective when you can focus on your sole sacrifice rather than generally resolving to spend less money. And it’s easier to keep track — if you pack a lunch for work rather than going to McDonald’s one day each week and it saves you $3 to do that, it’s easy to calculate that you’re saving $150 a year.
Shopping slowly involves several concepts. First, it means that you plan your shopping trips, which helps prevent expensive impulse purchases. Second, shopping slowly means that you comparison shop, clip coupons, and otherwise get the best deal possible. Finally, shopping slowly means you resist using credit for purchases that can wait. Sure, you want to buy all new accessories for your bathroom this minute, but if you wait a month, you may be able to pay cash.
Inventory Your Financial Life
Resolve to sit down once or twice in the new year to seriously consider your financial life. Start your financial inventory by writing down all your sources of revenue and all of your major expenses. Then examine each one in turn. Here are some questions you might ask:
- Are you getting the best price on the various types of insurance you carry?
- Is your phone/internet/cable plan exactly what you need and can afford?
- Do you really need three cars?
- Are there some tasks you are paying others for, such as lawn care, that you could do yourself?
- Is it time to ask for a raise or promotion, or to seek a new job?
- Is your 401K allocated properly?
Find savings or new money in just a couple of these and you could end the new year with a healthier bank account.
Teach the Kids About Money
This year, focus some of your parental effort into teaching your kids about money. If your children are young, you might give them their first allowance and show them the importance of saving 20% each week. If they’re preteens, help them become entrepreneurs by suggesting jobs they could do in the neighborhood or items they could create and sell. If they’re teens, get them involved in your family finances by explaining how you budget, make major purchase decisions, save for college and retirement, etc. These three suggestions are only the tip of the iceberg — there are tons of other ways to teach kids about money.
Set Some Specific Financial Goals
Being vague about financial improvement is lazy and ineffective, so instead set some clear goals. For example, consider ending each month with $250 more in savings than you had the previous month. You can accomplish this by either saving that much, earning that much more, or some combination. Exclude things you can’t control, such as the stock market (that is, if your stock portfolio drops by $100 in a month, you’re not really $100 further behind).
Some other possible goals: Find one specific area in your budget each quarter that you can trim by at least 10 percent; set aside exactly 10 percent of each paycheck for savings; end the year with zero balances on your credit cards. The key is to be specific, because specificity breeds discipline.
So when the New Year’s noise makers are put away and the streamers are cleaned up, take an hour to consider these potential resolutions. Even if you choose just one or two, the new year will end more financially stable than this year did.