Many people resolve to save more for retirement at the beginning of the year only to peter out at the middle or the end. It’s not easy to keep New Year’s resolutions, so here are five tips to help you accomplish your financial goals next year:
Set specific achievable goals. A lot of people set vague goals like, “I’ll save more for retirement.” or “I’ll exercise more.” You can’t quantify your progress with these vague resolutions, and you are just setting yourself up to fail. Setting specific and realistic goals will encourage you to keep going and make it easy to track your progress.
One of our 2013 New Year’s resolutions was to contribute $17,500 to my wife’s 401(k). This might seem high to some people, but she contributed $17,000 the previous year, so it’s just $500 more for the year. If you saved $5,000 for retirement in 2013, then maybe $6,000 would be a good target for 2014. You need to determine what a realistic goal is for you.
Make a plan. Once you make a resolution, you need to figure out how to accomplish it. Say you want to save $1,000 more for retirement in 2014. Where will that $1,000 come from? You can cook more at home to save money, get a raise, work a side job or even sell some stuff on Craigslist. If you don’t have any idea where that extra $1,000 will come from, then this goal will be much more difficult to accomplish.
Automate it. The easiest way to accomplish your financial resolutions is to automate it. My wife increased her 401(k) contribution by $20 per paycheck last January and she was done for the year. It would have been much more difficult it we waited until December to contribute the extra $500. The end of the year is a terrible time to try to save more. Many of us have travel plans and gift expenses. It’s much easier to automate it at the beginning of the year and take advantage of dollar-cost averaging.
Write down your resolutions. Writing down your New Year’s resolutions makes them real. If you don’t put them down on paper, I guarantee that you’ll forget them by April. Write down your goals and what it will take to accomplish those goals, then put them in a noticeable place. I review my goals once a month to see how much progress I’m making, and that’s a good way to stay motivated.
Make your challenges public. Don’t keep your New Year’s resolutions to yourself. Sure, some of us are self-motivated enough to be accountable to ourselves, but it’s much easier if you have some help. Share your goals with your family and close friends so they will know what you are trying to accomplish. Who knows, maybe you will find motivation by having a healthy competition with someone striving toward similar goals. By motivating each other, you could make progress toward your goals.
I share my New Year’s resolutions on my blog, Retire By 40, and I have a huge motivation to accomplish them. I don’t want to fail in front of 300,000 readers. It would be a big humiliation if I don’t accomplish most of my goals, but I can also be honest about what I cannot accomplish and take steps to reassess those goals.
The new year will be a chance to start fresh. Be specific and realistic about your goals, and plan accordingly on how to accomplish them. If you really want to accomplish a goal that is important enough to make a resolution about, then follow these steps to keep yourself moving in the right direction.
Joe Udo blogs at Retire By 40 where he writes about passive income, frugal living, retirement investing and the challenges of early retirement. He recently left his corporate job to be a stay at home dad and blogger and is having the time of his life.