Instead of concluding that New Year’s resolutions just aren’t your strong suit, our Pavlovian response to the month of December is to once again set ourselves up with resolutions. For the record, this year, I am going to try to never touch my phone when I am driving which would thrill my son Matt. He’s right. That’s probably why I now have a car with a hands free bluetooth car phone.
Last year, I spoke about how to realize your New Year’s resolutions. This year, my advice is going to centre on realizing financial resolutions. Regardless of your resolution shortcomings, people seem to have more success meeting their financial goals by setting shorter-term goals and focusing on one at a time.
However, let’s pace ourselves. Instead of trying to attempt all the things on this list for the next year, pick one or two resolutions to follow through and try it for a specific amount of time. Three months is a personal favourite, but you’ll likely want to adjust your timeline based on the chosen goal.
Here are easily attainable real financial resolutions to consider. Notice the order of the resolutions. We are going to start easy and work our way up.
Buy less coffee
Instead of setting the goal of “cutting down” or “buying less,” make it quantifiable. If you currently buy five cups of coffee a week, cut yourself down to one a week as a treat. If your coffee is $2.50, you’ve gone from spending $12.50 a week to only spending $2.50 a week. For the month, if you bought one coffee a week instead of five, you’d spend $10 on coffee as opposed to $50.
Walk more
If you spend a lot on gas, transit, taxis, or Uber, the solution might be to cut the short driving trips out of your life. Of course, if you have a 10-kilometre commute to work, you might not want to substitute that with a walk. However, if you’re in the habit of driving the mile to a friend’s house, or to Tim Horton’s, this could be where you forego the car or cab trip and talk a walk instead.
Takeout free month
Try a takeout-free month. It’s self-explanatory; challenge yourself to not order any takeout or delivery. If you order $30 worth of takeout/delivery food a week, that’s $120 worth of savings in one month or $1,440 per year.
Use reusable water bottles
Eliminate bottled water from your budget. Because buying a bottle of water or seltzer only costs $2, it doesn’t ever seem like it’s adding up. But again, if you buy one three times a week before a yoga class, that’s $6 a week ($24 a month) you could easily save if you kept a reusable water bottle with you.
Reduce drinking out
Yes, I know. Who am I to say that with my recent bourbon posts on Facebook. I like to say my family includes James, Jim, and Jack. What I do mean is reducing the number of drinks you buy out. Try a two-drink maximum whenever you’re out at the bar, because the markup on alcohol is astronomical. Winter is the perfect time for a three-month test run, because you’re already less motivated to go out.
Focus on health
Take care of your health which includes your teeth and eyes. This is more of a year-long goal, as opposed to something to only focus on for a month. Consider this statement I once heard from someone: “For two years, I saved money by not going to the dentist. When I finally went, I think I spent about $800 on cavity fillings.” I still can’t digest this logic. Preventative care, while requiring you to pay copays every time you visit a dentist or doctor, can ensure that you aren’t paying for an issue that could have been avoided. And it is understood that it is also much better for your health.
Shop less
I know its tough this time of year with all those post Christmas sales. But yes, shop less and buy better quality goods. Again, this needs to be quantifiable. For an allotted amount of time, try cutting name brands and boredom shopping completely out of your life. With the money you save from not buying new clothes here and there, you might find that you’re able to afford a better-quality, more lasting piece of clothing.
Try splurge to save
This method goes hand-in-hand with buying better quality, but shopping less frequently. For a long time, I bought the best-value option on instinct. And while sometimes that really is the best route, sometimes spending more upfront allows the product (whether it’s a pair of nice boots, or a set of pots and pans) to last longer. Before you buy, do some research to find the best-quality version, and check the reviews to see how long it lasts. You might find that the more expensive option is the better long-term investment.
Up your savings
I know this may be a challenge for most, but try it, you may be surprised. Target to increase your savings by $100-$300 a month. Doing a trial period of this for three months is ideal, because it will force you to see what your cash flow would be like if you were short $100-$300. Ideally, you’ll realize that when you automate the payment, you don’t miss that money at all. If all goes well, you can keep your higher savings rate all year.
Organize your finances
Develop an organizational system for your finances that you can stick to. This should take one month out of your year, and if it is effective, it will provide some ease for the other 11 months of your year. What’s more important than implementing a filing system that involves a label maker and seven different coloured highlighters is finding a system that works for you.
Cash flow
Take charge of your finances by creating a budget. Start by calculating after-tax income and subtracting fixed monthly expenses. Then allocate portions of the remaining income for savings, important goals and a few things that just make you happy. If this sounds complicated, relax; today’s user-friendly budget apps can take a lot of the pain out of the process. To further simplify money matters, consider setting up automatic bill pay, an automatic savings plan and separate savings accounts for specific goals.
Emergency fund
Without a solid cushion, any unexpected job loss, medical challenge, or serious property damage could lead to lasting financial hardship. An emergency fund with three to six months’ worth of expenses can protect your standard of living and offer peace of mind. Commit to making consistent deposits to this fund even if you can only spare a small amount each month. Because you may need to tap into emergency cash at a moment’s notice, choose a vehicle that gives you easy access, such as a savings or money-market account.
Improve credit
You likely know that credit scores affect financial approval and interest rates. But the influence of those three little numbers stretches much further. Prospective employers and landlords frequently check credit, so low scores may mean missing out on the best jobs and apartments. Credit scores also may affect insurance premiums, mobile phone offers, vacation costs, and even whether utility hookups require a cash deposit. For top scores:
- Pay all bills on time.
- Keep credit card balances at no more than 20% to 30% of the credit limit.
- Carry a mix of debt types such as credit cards, auto loans and personal loans.
- Monitor credit to catch and correct any errors or problems.
Control credit cards
If you have it, make a plan to pay off your credit card debt. Even a better plan? Do not incur credit card debt. The plan, of course, will depend on the amount you bring in compared to the amount of debt you have. What will help the most is setting a specific time frame; if you can push yourself to pay off your credit card debt in four months, for example, that will give you the amount you need to pay toward it every month.
Knock down debt
Even with a great job, high-interest debt can sabotage financial health. To dig out from under this burden, consider concentrating efforts on your highest interest debt first while continuing to make timely smaller payments on all other obligations. When the first balance is satisfied, focus on the most expensive remaining debt and continue this way until your debt-free.
If debt from multiple sources is unmanageable, debt consolidation may help you regain control. This approach streamlines debts into one payment, often with reduced interest and a lower monthly cost. Depending on your individual situation, home equity financing, personal loans or zero interest balance transfer credit cards may be effective debt consolidation choices.
Maximize retirement contributions
Retirement may not be on the immediate horizon, but when the time comes it may well last 20 years or more. You’ll probably need somewhere from 70 to 90% of your final-year income for each year of retirement. CPP and OAS will help but won’t get you there. Saving such a sizeable sum takes decades, so it pays to start early. Put as much as you can afford into retirement savings and if you have any employer matching group RRSP, contribute the maximum employer-matched amount.
Make this the year you max out your retirement account contribution. While this, again, is a year-long goal, it is the first step toward becoming a better investor. Once you have the number to work toward, make a plan that allows you to hit that goal by the end of 2018.
Smart money resolutions boost financial stability not just immediately but over the long haul as well. The bonus takeaway is the confidence that all life’s remarkable milestones and challenges won’t break the bank. We all move at different paces. In achieving our new year goals, we each need to find a strategy that works for us. Choose something easy to start with and do it for a defined time length. Short term success will heighten your long term success. Resolutions are just ways in which we want to improve our lives and those of everyone around us. Realizing our resolutions aligns with Keeping Life Current.
