It may take months, weeks, or mere days for the shine of the new year to wear off. You’ll know when it happens to you because you’ll feel your levels of motivation drop. Once they do, your pledge to fix your finances in 2018 is looking less like a promise and more like a pipedream.
If you’ve had similar thoughts run through your head, it’s time to change the way you think. Though 80 percent of New Year’s resolutions fail by Valentine’s Day, who’s to say you have to pack it in just because you haven’t reached your targets in a month and change? Nobody, that’s who! With a goal as important as your finances, you need to stay committed — even if your track record hasn’t been flawless. Don’t give up just because you’ve spent more than you intended. If you had plans to start the new year off debt free, it’s not too late to double down. Use this quick guide to restart your resolution, so you can save money and pay the bills.
Use a budget
Nearly two-thirds of the country doesn’t use a household budget. It just so happens that roughly two-thirds of GoBankingRate’s survey respondents admit to having anemic savings. Many of them live paycheck to paycheck with no means to pay for emergencies that cost more than $500. While credit cards or payday loans can help in a pinch, they’re not a permanent replacement for savings.
A budget can help you avoid living paycheck to paycheck. It sets out how much you earn and spend in a typical week or month, depending on the time frame you choose. Once you have the inner workings of your accounts laid bare in front of you, you can see how bad habits waste money you could otherwise put towards credit cards, personal loan repayments, or — in an ideal world — savings.
It also helps give specificity to your goals. Spending less and saving more is all well and good, but as a goal, it’s pretty vague, and vague resolutions end up failing. You won’t really understand what less or more is without knowing what you’ve been spending — down to the last cent. Don’t think of your debt-free promise in guestimates. You need to know exactly what’s happening with your money if you expect to make any realistic and effective changes to your finances.
Take the time to make an accurate budget, but don’t set it and forget. A budget is a living, breathing document that needs to change as you repay loans, earn more money, trim expenses and choose new goals.
Resist the impulse purchase
In other words, don’t buy what you don’t need. It’s obvious, isn’t it? From your perspective in front of your screen, it certainly is. When you’re out in the wild, tempted by the sweet scent of pumpkin spice or the unignorable signs touting incredible 3-for-1 deals, it’s a lot harder to accept. You may be compelled to order that latte or stock up on hand soap, even though you don’t need the sugar and your cupboard back home is already full of pump bottles.
Shark Tank investor and social curmudgeon, Kevin O’Leary, recommends you avoid making a purchase just because it’s a good deal. He reminds you no deal is good enough and says, “if you’re spending money on something you wouldn’t have bought otherwise just because it has a ’50 [percent] off’ sticker on it, you’re still throwing away your hard-earned dollars.”
Instead, he suggests using lists. Add only those items you need to these lists and never stray from them. If you’re used to caving into your desires as soon as you see them, this may be hard to get used to you. Stick to it, no matter how challenging it can get. If you see something that you feel like you absolutely need to buy, put a timer on it. Financial experts suggest waiting anywhere between 48 hours and 30 whole days to consider the purchase. If, once the timer is up, you still feel like you need that item, then they say it’s all right to purchase it. But more often than naught, those two to thirty days are all it takes for you to realize the folly of your ways.
Put away your credit cards
It sounds so simple, yet this may be the hardest trick of them all. The nation reaches for the plastic in their wallets to pay for the necessities — and the not-so-necessities. Americans hold a collective $1 trillion in credit card debt. This averages out to $5,290 per person.
Financial experts like Gail Vaz-Oxlade suggest eliminating your reliance on credit cards. Vax-Oxlade recommends using cash for each of your purchases and managing your bills through her own spin on the envelope budget system. This method requires you to create envelopes for each of your expenses in a week — or cash jars, as Vaz-Oxlade calls them. Things like rent, groceries, and even entertainment get an envelope of their own. Then you fill the envelopes with the appropriate amount of cash you need to pay for that expense. Once you spend the allotted cash from an envelope, you can’t replenish it until the next week.
It’s easy to upgrade to the new iPhone X with a credit card, even when you don’t have the money to afford it. It’s a lot harder to justify a new smartphone, let alone finance one when you physically don’t have enough cash in your cell phone bill envelope.
It may seem tedious to transfer cash from your account to the envelopes to your landlord, but it forces you to think about how you’re spending your money. Research shows that watching your piles of bills dwindle has a bigger psychological impact than if you were to watch the digital account balance lower.
That’s the real lesson. You need to make the connection between your thoughtless spending habits and their effects on your finances. Once you can recognize your bad habits and how they make you feel, it’s easier to commit to hard things like following a budget or ignoring the latest must-have. Try these tips on size and see if you can eliminate your financial vices from your life. Whatever you do, don’t get discouraged if you break out the credit card and ignore your budget. Don’t give up because of one moment of carelessness. Honor your promise for a debt-free year, put the plastic away, work on your business and get back to your resolution.