emergency fund

  • 4 NEW YEARS RESOLUTIONS THAT FAIL AND HOW TO FIX THEM

    We are 3 weeks into 2019 and if you set any resolutions for the new year you’ve probably given up or forgotten all about them by now. Don’t feel bad, you’re in the same boat as everyone else. We humans are bad at making and sticking to resolutions, especially if they are non-specific and tied to an arbitrary date like when the Earth completes full revolution around the sun.

    The secret to crafting resolutions that stick is to make them SMART: Specific, Measurable, Action oriented, Realistic, Timely. Most resolutions that fail do in part because they don’t have enough of these attributes. They’re too broad, “what does lose weight or get in shape mean?”. Or they aren’t realistic, “are you really going to run a marathon this year if you haven’t run more than one mile in 2018?”.

    Here I’m going to go through 4 typical failure prone resolutions and how you can structure them SMART-ly to ensure success!

    1. Embark on a no spend January

    This is a popular resolution because we just finished with the holiday season and all of the orgiastic consumer spending that entails. Most of us start January looking at our bank balances and credit card bills thinking that somethings got to change. Going cold turkey by only spending money on the essentials seems like the best bet.

    This resolution is specific and measurable, but it’s not very realistic, one of the hallmark problems of a New Year’s resolution.

    The problem is the binary nature of the resolution. Once you commit to buy nothing other than the essentials, one of two things start to happen. You start to backslide on what you categorize as essential – “Well I really need that double mocha frappe latte because I need the caffeine kick if I’m going to get anything done today” – until you’re back to your old spending patterns. Or the first time you fall off the wagon and buy something you don’t really need, you say “screw it” and give up on the rest of the resolution.

    What you should do instead

    Resolve to use the 48-hour for non-essential purchases and track your subsequent spending. This resolution is still specific and measurable, while also being more realistic and achievable.

    How does it work

    When you think you need to buy something, set a 48-hour timer. After two days, consider the item again and whether you still need it. Often, you’ll find the initial desire to purchase has passed and you find you don’t actually need it. But if you do need it, then you can make your purchase guilt free.

    The second part is to track your spending on these items, especially on things that you purchase while bypassing the 48-hour rule. By tracking what you spend and buy, you can build that into your budget, or set limits to help yourself in the future. Like, no browsing amazon.com after 11pm at night.

    2. Start exercising

    Another all-time favorite resolution. If you do an online search for popular resolutions this one appears on almost every list. After the extra eating and drinking during the holidays, all of us could do with a bit more exercise.

    We start with the best of intentions. The first visit to the gym is great, we feel awesome after spending a half hour on the treadmill and moving some weights around. The next few trips don’t give us quite the same rush, and by the second or third week of January it just feels like too much effort to go to the gym after work.

    This one is action oriented, but not very measurable, or realistic if you don’t happen to enjoy going to the gym or running during the cold winter months.  

    What you should do instead

    Find an active hobby you enjoy and sign up for classes or schedule events at specific times.

    How does it work

    Everyone knows they should get more exercise, but for most people the initial good feelings you get of going to the gym wears off after the first few visits. Rather than spending money on a gym membership that you won’t use, the better bet is to find an active hobby that you enjoy doing instead.

    Even if you spend a bit more money signing up for a weekly tennis or soccer league, you will get more in value than the gym membership you paid for but didn’t use. By signing up for a group class, team event, or scheduling another weekly hobby like a snowshoe outing you add specificity and timeliness to your resolution as well.

    3. Stop eating out as much

    It seems a lot of these resolutions deal with the aftereffects of all the overspending and overeating during the holidays. Or maybe that’s just me?

    On the face of it this is a great resolution for your health and your wallet. Spending less on meals at restaurants leads to a better budget and eating healthier food at home as well. But this also lacks in measurability and realistic aspects. Similar to vowing to “work out more” it’s easy to backslide after a few days or weeks and especially after a long day at work when you’re fridge is out of groceries.

    What you should do instead

    Meal plan at the beginning of each week, but allow yourself two makeup days for when life gets in the way.

    How does it work

    It’s better to allow and budget for one or two meals out per week if you know that by Thursday you get swamped at work and won’t have the energy to make dinner at the end of the day. Resolving to make a plan at the beginning of each week improves the action orientation and giving yourself the option to have a cheat day or two during the week makes it much more realistic that you will stick with it and achieve your goal of reducing the amount of times you go out to eat.

    4. Build up your emergency fund

    Ok, I lied, this is one resolution you should definitely put on your list, but there are ways we can SMARTify it to ensure that we achieve our goal.

    A good emergency fund target to shoot for is having 3-6 months of living expenses on-hand. If you currently have $2,000 and you need to build up another $4,500 to feel comfortable, a good way to structure your resolution is by resolving to put $375 every month into your emergency savings account. An even better way is to do this automatically by setting up a monthly auto deposit into your account. This resolution is specific, measurable, action oriented, realistic and timely. Boom! Nailed it.

    If you’re looking at your finances and thinking you should have structured some 2019 resolutions around making a budget, paying off debt or organizing your bank accounts give us a shout. We’re happy to talk and the first meeting is always free!

    Here’s to a year of growth, health and adventure!