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Why New Year’s Financial Resolutions Fail (and What to Do About It)

Why New Year’s Financial Resolutions Fail (and What to Do About It)

Casey Hynes — Up Close and Personal Finance

  Art by Eli Miller

Art by Eli Miller

Like 40 percent of my fellow Americans, I started this year with a list of goals I wanted to achieve in the next 12 months. But also like most of my fellow resolution makers, I’ve struggled in the past to keep the momentum going throughout the year.

Despite good intentions and a healthy dose of determination, less than half of people who make New Year’s resolutions are sticking to them at the six-month mark. To understand why so many resolutions go unfulfilled (and keep myself in check this year), I spoke with Mary Gresham, an Atlanta-based psychologist and financial therapist.

It can often come down to our impossible expectations. “People get the wrong goals in mind,” says Gresham. “Instead of one small, doable goal they can maintain, they set goals that are too big or too hard and too outcome-oriented.” 

Gresham offers “reigning in my spending” as an example of a vague, outcome-oriented goal. There are no actionable steps or criteria, so it’s difficult to measure progress. Where do you want to reign in your spending? What counts as a worthwhile expenditure, and what doesn’t?

Instead of creating lofty resolutions, Gresham suggests developing small goals that take concrete steps toward bigger goals. The first move toward reducing your expenses, for instance, might be canceling recurring charges such as unused gym memberships or lackluster subscription boxes. Forcing yourself to consider the value of buying the product or service each month can make you more reflective of your spending on the whole.

Gresham’s advice hits home for me because historically I’ve taken an “If you envision it, wealth will come” approach to financial goal-setting. For example, in the past I’d set an income target that bore no relation to my current freelance writing trajectory. I wouldn’t define how I’d get there or what habits I’d need to develop to achieve that amount. I just set the goal and assumed I would “figure it out along the way.”

But as a freelancer, I can’t predict exactly how much money I’ll earn in a year. I can’t control external factors like economic downturns or clients’ budget constraints. To be sure I could reach my goal, I needed to create smaller goals to guide me. I could be proactive about pitching editors and networking with companies so I’d have a steady stream of work, for example.

Our methods aren’t the only obstacle between us and our financial goals, Gresham says. There’s also the matter of how we talk—or don’t talk—about money.

If you resolve to exercise more, chances are you have a friend who’s in the same position, making it easy to swap stories about the struggle to find time for a workout between work, chores, and kids. By openly sharing those struggles you’ve given yourself more accountability to find that time—and make that resolution stick.

But when it comes to money, even though it’s a major source of stress for many Americans, people are more reluctant to open up. According to Gresham, this fear of talking finances stems from a desire to fit in. For instance, you may not want to follow your friend’s story of a lavish vacation with a progress update on your resolution to pay off heaps of credit card debt. But when you struggle in silence, “you leave a lot of social support and social accountability on the table,” Gresham says. 

Consider confiding in one or two trusted friends and asking if they’d like to form a financial accountability pact, Gresham suggests. You might hold a monthly “money club” where everyone shares their goals and and challenges. Perhaps everyone reads the same finance-related books and discusses the insights they glean.

While reflecting on my financial life at the end of last year, I realized the progress I’ve made financially happened because of new habits I’ve developed. They’re still not as ingrained as I’d like, but the continual grind toward financial freedom—saving instead of spending, adding impulse items to a wish list instead of buying them instantly, opting to eat at home instead of ordering takeout—is really what led me to a better financial place. Yes, the improved financial outcomes are nice, but once I hit a particular goal, there’s another one waiting in the wings. By developing habits to meet those goals, I’m also ensuring security well into the future, no matter the year’s particular resolution.

Everyone’s financial goals are unique, but we can all make collective resolutions to focus on progress, share our experiences and struggles with friends, and live a happy and prosperous life this year.

 

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