4 good money resolutions (and 4 to avoid)
Sure, you want to pay down debt and save more money. But how you frame those goals for the new year will make a difference in your success.
It's that time of year again, when we promise ourselves to be better -- smarter, thinner, richer, or perhaps more charitable -- in the coming year.
Some New Year's resolutions are definitely better than others, particularly when it comes to paying down debt, building wealth and getting results. Here are four good and four bad financial resolutions for 2012.
Keep in mind that any resolution you pick should be measureable, attainable and worthwhile -- the SMART approach. "Make more money" is too vague. "Selling DVDs you haven't watched in three years" is something you can accomplish with decent results.
4 good money resolutions
Unless you can pay off the balance each month, stop using credit cards. There are disturbing indications that people put more of this year's Christmas spending on credit cards than they did last year. Remember, if you're paying only the minimum balance due on your cards, you're a chump. (See what happens when you make extra payments.) Freeze them in a block of ice, if you must, to limit your access.
Up your contribution to your retirement account. OK. Now up it again. The sad fact is that many people aren't saving enough to keep themselves in the style to which they've become accustomed when they're no longer earning a paycheck. Unless you're fine with surviving on Social Security, saving for retirement should be your top priority once you've paid off consumer debt. It should even trump saving for the kids' college funds.
Put the money you've "saved" into savings. That money you didn't spend at the grocery store because you wisely stacked store sales and coupons isn't really saved if you spend it on something else. The blogger at Budget Glamorous mentions this as one of her "budget hypocrisies."
If it's sitting there in the account, my mind doesn't remember that $47.50 is extra happy money for paying down debt. I just breathe a sigh of relief that my grocery bill has a little extra padding this month! Or worse, get all excited and buy something I don't need because I think I have the money for it.
Apply it to debt -- that's called "snowflaking" in the personal-finance blogging world -- or set it aside for your retirement account.
Change your withholding. For a variety of reasons, the average tax refund last year was just over $3,000. Couldn't that kind of money -- it is yours, after all -- have been used to pay down debt or boost a retirement account through the course of a year? Getting it in one lump sum in the form of a tax refund could be temptation to spend it. Post continues below.
4 money resolutions to avoid
Take up serious couponing. I'm with Paula Pant at Afford Anything on this. Couponing consumes a lot of time that for many folks could be better spent doing something else.
Plus, I rarely see coupons for the types of groceries I buy -- basic ingredients for meals cooked from scratch, not processed foods, that keep per-meal costs low. However, I am aware of the sales at the local grocery store and will match, say, a coupon with a discount on coffee. That's a big savings for very little effort.
As an alternative, Paula recommends getting a discount gift card for the stores where you regularly shop.
Join an expensive gym. This could be valuable if you have the willpower and drive of J.D. Roth of Get Rich Slowly, who raves about his Crossfit training. But, let's be realistic here. Joining a gym is serious business, according to the Chicago Tribune.
Gyms are notorious for offering cheap deals to get you in the door, but signing up for a membership can leave you responsible for much more expensive monthly dues that can stretch for years. Make sure you're fully committed to paying the dues in the months or years to come.
If you think making the financial commitment will enhance your desire to go regularly, it often doesn't work like that (although Kate Tormey wrote on Bundle about a gym that will charge members an extra $10 for each workout session they miss on top of the regular membership, which seems to get people's attention). Time says 60% of gym memberships are not used.
You really can exercise on your own, without the fancy equipment. "To summarize: The only thing that has gotten heavier since I quit the gym is my wallet," a blogger known as "Mr. Broke Professional" said. If you must join a gym, pick an inexpensive one and test your commitment to getting in better shape.
Get out of debt and save money. This was No. 5 on Time's "Top 10 commonly broken New Year's resolutions" for 2011, and for good reason. It's too big, too poorly defined and, with so many families' personal finances in ruin, unattainable for many. Time instead recommended manageable tasks, like shopping for better insurance rates. (Just remember to use the savings to pay down debt.)
Make New Year's resolutions about money.The Wall Street Journal says 88% of resolutions fail. A major reason is that willpower is like a muscle. The article explains:
Most of us assume that self-control is largely a character issue, and that we would follow through on our New Year's resolutions if only we had a bit more discipline. But this research suggests that willpower itself is inherently limited, and that our January promises fail in large part because the brain wasn't built for success.
Set small goals that can be pursued at any time of the year -- particularly ones you can take care of with a simple step, like increasing the amount automatically deducted from your paycheck and placed in your retirement account. Brown-bag lunch one more day a week. Pull your credit reports and make sure they don't contain mistakes.
Have you made any personal-finance resolutions for 2012? How do you hope to accomplish them?
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