Many of us make New Year’s resolutions to save more money, create a family budget, get organized, etc.
How many of us keep our New Year’s resolutions? Richard Wiseman, a psychologist at the University of Hertfordshire, says that only about 25% of us keep our New Years resolutions!
No matter if you decide to save more money starting on the first of the year or today, the secret will be creating a budgeting plan and sticking to it. And, “sticking to it” is a matter of habit.
It’s commonly accepted that it takes 30 days to break a habit. (This number varies throughout psychological research). But, when you’re getting out of debt, creating a budget, or getting organized, it’s not just about breaking bad habits, but creating new ones.
According to an article published in the Psychological Review, “Habits are learned dispositions to repeat past responses.”* So, in order to create good habits, you’ll need lots of past experience with positive behavior.
In the same study, “[Habits] are triggered by … past performance, locations, preceding actions in a sequence, and particular people.” So, if you have negative habits that are already imbedded, you’ll want to avoid the triggers that created them.
How do you stick to your New Year financial plan? Here are the tips to making your New Year’s resolution stick!
Be Realistic
This one seems obvious, so I won’t belabor it too much.
If you make $40K a year and your expenses are $45K, then it’s realistic to cut your expenses to less than $40K. In this case, it’s not realistic to save if your expenses are more than your income. So, you should work on lowering your expenses, first.
Keeping your expectations within maintainable goals is the first step towards success.
Write down your budgeting goals and budgeting plan
There’s a positive correlation between setting goals and forming a habit. Specific goals with measurable consequences will produce the best outcome.
In other words, it’s not enough to simply make the goal, “Save More Money”. You’ll need a plan to go along with it: “Save more money by: 1) creating a budget 2) meeting with your spouse to get support for the budget 3) identifying specific areas where costs can be cut 4) identifying fixed expenses and setting money aside for them, 5) this list continues according to your specific budgeting plan.
Repeat your goals (several times) to create a habit
We’ve all heard the saying, “Practice makes perfect”. Well, I don’t agree with the “perfect” part, but practice certainly does make permanent.
Repetition is the key to creating a habit (good or bad).
How do you create repetition when it comes to saving money? Create guidelines to monitor your spending habits. For example, before every discretionary purchase, create a trigger question that helps you stay on track. For example your question might be, “Is this purchase within my outlined budget?”
Repeatedly asking yourself this trigger question at every discretionary purchase opportunity will become a habit that helps you focus on the budgeting goals you want to accomplish.
Just like practicing a musical instrument or exercising on a regular basis, repetition makes permanent.
Visualize your goals
Visualization is a wonderful tool to helping anyone accomplish goals. Sports coaches often tell their players to visualize winning the game, making the basket, or crossing the finish line.
Visualize what you’d like your finances to look like (and write it down). Then each day, make the small steps you need to meet your goals and save more money.
Track your achievements
Like visualization, it’s great to see your efforts pay off. Unlike other New Years resolutions like losing weight or kicking the habit of smoking, some goals like “saving money” may be more difficult to “see”.
Track your results with monthly or even weekly charts, graphs, spreadsheets, or whatever you like. These tools become a physical reminder of your efforts and help many to stay on track.
Avoid negative situational triggers
This is probably the most under-discussed part of creating a new habit.
Ellen Peters, a professor of psychology at Ohio State University who studies decision research says, “Situational cues bring out habits that are deeply embedded.”
If you’re trying to get out of debt, or simply having some spending habits that make it hard for you to save money, negative triggers can be your downfall. So avoid them.
Identify your negative triggers. Perhaps your negative trigger is shopping as a hobby. Perhaps it’s test driving cars or motorcycles when you don’t need a car or motorcycle.
Whatever your negative triggers, identify them immediately and avoid them like the plague!
*”A New Look at Habits and the Habit-Goal Interface” by Wendy Wood and David T. Neal of Duke University, Psychological Review, 2007, Vol. 114, No. 4
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