The new year is a prime time to set fresh goals.
And saving more and spending less is a perennial New Year’s resolution. It was noted by a third of people surveyed last year, and the second most popular resolution after dieting, exercising and weight loss resolutions.
But New Year’s resolutions, especially about money, have a way of walking off the job. And what once seemed like an attainable goal gets shoved to the side like that ugly coffee mug you got in the office holiday gift exchange.
We turned to Clever Girl Finance founder and CEO and best-selling author Bola Sokunbi for advice on financial resolutions that everyone can make—and keep.
The biggest mistake people make with their resolutions, Sokunbi says, is making lofty goals without a plan. For example, she says, you may say you’re going to save $10,000 but you don’t go the extra mile to create a plan that breaks down your savings goal into achievable steps.
“When you have goals with no plans, then they’re not goals,” Sokunbi says. “They’re just dreams.”
The following is an edited transcript from a recent conversation with Sokunbi, where she offers her top five financial resolutions for 2020, plus strategies for sticking with them throughout the year.
1. Create a financial plan
I don’t mean spending hundreds of dollars to talk to a financial advisor. I mean sit down and look at the big picture of your finances. Understand how much you own, what assets you have [and] how much debt. Then understand what things you need to put in place. Do you need to start a budget, or contribute to your employer’s retirement plan, do you need to save for an emergency fund? Understand what you need to get done.
As part of that plan, you need to set goals [and] tie your goals to your plan. It kind of gives you a diving board to go off of into the new year. A lot of people come up with New Year’s resolutions of “I want to save” or “I want to pay off debt” and “I want to do all the stuff” but they haven’t really built a plan around it. And because there’s no plan to accomplish those big goals, they end up failing the goals.
2. Take small steps toward your financial goals
It could be opening a new banking account this week, or checking your spending at the end of the night, looking at your receipts, just getting yourself in the frame of mind that now that you have this plan, you need to execute on it.
Everyone can do these things. Everyone can sit and create a plan, everyone can say, “Okay, I’m going to set a reminder on my phone, here’s what I’m going to do every day or every week for the next six months, [I’ll] check my account every Friday, or review my budget.”
Once you start doing that, it’s going to help you build consistency. And consistency is what drives habits. Then it becomes second nature.That’s how you make yourself a saver. And that’s how you get to the point where you’re able to get out of debt because you’ve built in the consistency over time.
3. Cut back your spending, but still have fun
You should start off with the idea of [doing] everything in moderation. When people think about cutting back, they think about punishment and not being able to do the things that they love. At the end of the day, life is not just about money. Money matters, but you want to live a good life and you want to be happy. You can have all the money in the world and be miserable.
If your daily coffee or eating out is something you love, but you do an assessment of your finances and see you are spending $200 on coffee, or $500 on eating out every month, then maybe you decide to get your favorite drink twice a week, your $10 coffee. That’s fine, guilt free twice a week.
Or, if I want to go out to eat with a friend, as opposed to every lunch time during work, I’d meet them on Wednesdays and Fridays. Everything in moderation. The whole idea is that you don’t want the things you love doing to turn into things that cause you to miss out on your financial goals. Then you start to regret doing those things.
Build your coffees and shopping trips into your financial plan, build it into your budget. The extra funds that you save from reducing [spending in] those areas, you put into your financial goals.
4. Earn more money
The side hustle thing is very trendy. I even had a side hustle. But side hustles are not feasible for everyone — especially if you have small children, which can be a challenge, or your schedule doesn’t allow it, or you’re working and going to school at the same time.
You can make money in other ways.
You can start looking for a better paying job that’s going to get you more money per hour, or biweekly, or per month. You can find a temporary part-time job to help accomplish those goals.
You can [also look at] the things that you have in your house, and what you can get rid of. For instance, I used to be a wedding photographer. And I was just going through my stuff and I was like, wait a minute I have this camera equipment that I’m holding on to that I could actually sell. Look for things in your closet, things in your kitchen that you could sell on Facebook Marketplace, on Etsy, on eBay to help you bring in extra cash.
Everybody has something in their house they can get rid of. If it’s not your stuff, it’s your kids stuff. I sold my kids’ cribs and strollers —You may not think your things have value, but if you’re not using them they could be valuable to somebody else. It’s a way to earn additional income
5. Adjust your circle of influence
By circle of influence, I mean the people you surround yourself with, and the content you consume that can influence the money decisions you make and the goals you achieve. It’s about prioritizing your time
Let’s say that you’re somebody who comes home from work and spends three hours in front of the TV watching Real Housewives. Maybe you [adjust your time] to only spend an hour [watching TV], and you spend two hours doing something that will help you achieve your goals—reading a book, listening to a podcast, watching some videos, getting organized, clearing out your house so that you can list things for sale, things like that.
Decide to wake up 30 minutes early and read a finance book or watch a video or start listening to a podcast on the topic about what you want to accomplish, whether it’s your personal finances or your career or relationship, or some other area you want to improve in your life.
Your circle of influence can help you stay motivated, because when people are setting their goals for the new year and they’re very excited and really hyped about it, there’s this whole euphoria from the season. But as time progresses, that euphoria is going to wear off and real life is going to set in, and things are going to happen that are going to set you back.
So in that moment, you need to have a good circle of influence where you don’t feel discouraged, and you get yourself back up and keep going, because you’ve got that motivation.