Happy New Year! Did you make any resolutions for 2024? Now that January is over, how are you feeling about achieving them?

If you’re struggling already, you’re not alone. In January, people often resolve to lose weight, eat better, and exercise. In addition, according to a recent poll by Experian reported by CNBC, nearly half of Americans (49%) pledge to save more money, and just under a third (31%) plan on creating a personal budget. Yet, a significant number of these aspirations tend to fade away within a few weeks.

What does it take to make our New Year’s resolutions stick?

Form Good Habits

When it comes to keeping financial resolutions, Savant financial advisor Edward McDougal, CFP®, says developing strong habits is key to success. McDougal acknowledges the enthusiasm that comes with setting ambitious goals in January but emphasizes the need for a sustainable approach. Instead of aiming for grand transformations, he suggests starting small and building confidence through measurable steps. His recommended reading includes Tiny Habits by B.J. Fogg, director of the Behavior Design Lab at Stanford University.

“Fogg says we have three options for changing our behavior,” says McDougal. “We can have an epiphany, change our environment, or take baby steps. Having an epiphany is difficult, but changing our environment and taking baby steps can lead to lasting change.”

McDougal also favors “habit stacking,” which is pairing a new habit with a current habit to increase one’s chances of sticking to the new habit. The concept originated from author S.J. Scott in his book, Habit Stacking: 127 Small Changes to Improve Your Health, Wealth, and Happiness, and inspired McDougal to implement his own habits:

  • “The moment I change out of my work clothes, I will change into my workout clothes.” (Physical health)
  • “After I receive my paycheck, I will pay myself first and save toward retirement.” (Financial health)
  • “When I am eating breakfast, I will choose one thing to be grateful for.” (Mental health)

It’s also important to track your habits so they stay top-of-mind. You can use a spreadsheet, a calendar, or a journal to hold yourself accountable and give yourself a feeling of satisfaction each day. James Clear, author of Atomic Habits: An Easy & Proven Way to Build Good Habits & Break Bad Ones, tells the story of comedian Jerry Seinfeld, whose goal is reportedly to “never break the chain” of writing jokes every day. “He is not focused on how good or bad a particular joke is or how inspired he feels. He is simply focused on showing up and adding to his streak,” writes Clear.

Laura Forbes, a private client group coordinator at Savant, began using YNAB.com (“You Need a Budget”) to organize her finances about six years ago. She praises YNAB for its unique principles of giving every dollar a job, embracing true expenses, rolling with the punches, and aging your money. Using the program has helped Laura stay on track, with positive results. “We were able to take a family vacation to Scotland because we had the money set aside. There was no, ‘let’s put this on a credit card,’” she says. Managing her budget has become a habit for Forbes, so she can stay in tune with her money.

Take a Values-Based Approach

Typically, we form habits to help us achieve our goals. But according to Savant financial advisor Libby Muldowney, CFP®, CRPC®, BFA, we can often experience conflicting priorities, which can make the process of goal-setting more difficult.

“An example of this could be determining whether to make extra mortgage payments or investing that amount each month,” Muldowney says. “Another might involve deciding whether to fund a child’s 529 plan or maxing out your 401(k).”

Muldowney emphasizes the importance of identifying core values before establishing goals, and then using those values as a compass when facing tough decisions. This strategic approach, says Muldowney, helps individuals prioritize what truly matters to them, ensuring their goals align with their fundamental values. In addition, she says, having goals based on values may increase a person’s likelihood of staying the course when motivation is lagging.

“If independence is one of your top values and you are trying to decide whether to max out your 401(k) or fund your child’s 529 plan, you can look to your values to inform your decision,” she says. “If you want to have complete financial independence in retirement and want to pass on your independent value to your kids, you may make the choice to fund your 401(k). If your family is most important to you, you may look at that tradeoff differently. Both can be appropriate, depending on your values.”

If you’re one of the many Americans who set financial resolutions for 2024, focus on creating goals informed by your values, and consider how you can form strong habits to help you reach those goals this year.

Source: CNBC: 9 Financial Resolutions to Set Now

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