Along with over indulging in champagne and rocking some questionable moves on the dance floor, setting overly ambitious resolutions are a vital part of New Year’s Eve tradition.
However, after the clock strikes midnight, a strange phenomenon occurs, and all our motivation to detox, learn to play the drums and pay off the credit card suddenly disappears.
In fact, Forbes contributor Dan Diamond explored research carried out by the University of Scranton last year and found that only 8 per cent of people actually stay true to their word and follow through with their New Year’s resolutions.
That’s a pretty dire statistic, however there are some strategies you can follow to improve your odds.
When the fireworks light up the sky this New Year’s Eve, don’t just set a resolution to improve your general financial situation in 2016 – get specific. Visualise the specific actions you’ll need to take to fulfill your goals. Here are five ideas to get you started.
1. Build an emergency fund
— Brisbane Journal (@brisbanejournal) February 17, 2015
If you don’t already have a decently sized emergency fund, commit to building one in 2016. What’s the point of an emergency fund? Well, as the name suggests, it’s a chunk of savings that you can fall back on to support yourself and your dependents should should anything unexpected happen to disrupt your usual stream of income, such as losing your job, falling severely ill or sustaining a long-lasting injury.
While the exact size of your emergency fund will depend on your specific circumstances, the Sydney Morning Herald suggested a general guideline of having three to eight months’ worth of expenses in your bank account.It might not sound like the most fun use of money, but remember that the larger your emergency fund, the less risk you face, and the safer you, your family and your assets will be in the long run.
2. Don’t buy stuff you never use
Many of us are guilty of buying obscure products in the heat of the moment, and then never actually using them (we’re looking at you rowing machine and dusty electronic drum kit). Resisting these purchases can be incredibly difficult, as the ’60 per cent off’ deals and ‘buy one get one free’ offers create a sense of urgency that make us feel like we’re somehow cheating the company.
Of course, this is rarely true. Very few businesses will ever sell their products at a loss, and if they do, they’re usually confident that you’ll purchase something else to make up for it. Make it your 2016 New Year’s resolution to avoid purchasing unnecessary goods and redirect the money you would have spent on those items into a savings account.
3. Reward yourself without breaking the bank
We often justify large purchases as rewarding ourselves for hard work or recent successes. While it is important to celebrate such events, it doesn’t necessarily mean that you should break your good saving habits to splurge on an expensive holiday, upgrade your vehicle or pick up a new tech toy.
Instead, consider rewarding yourself with free or cheap experiences such as guilt-free time off work or taking a day trip out of the city to immerse yourself in nature. In fact, the latter can not only help you save money, it may also make you feel more alive. Research published in the Journal of Environmental Psychology found that being outdoors and surrounded by nature has a positive influence on your vitality, energy and happiness.
The key here isn’t to stop rewarding yourself so much as reconsider whether the satisfaction you derive from such purchases is worth the cost.
4. Learn how to invest
A high interest rate savings account is an excellent place to start. Investing in more advanced channels such as stocks, bonds, real estate and businesses can be highly lucrative, though you’ll want to ensure you have a thorough understanding of the risks involved before you start laying down capital. For more advice on what type of investment is best for you, get in touch with your local financial advisor.You don’t have to be the Wolf of Wall Street to start investing your money, though it can be a daunting prospect for the uninitiated. In 2016, challenge yourself to learn a bit more about wealth growth strategies and perhaps start exploring some low risk options.
5. Pay off your credit card
The Australian Securities and Investments Commission explained that one of the most effective ways to do this is by paying off your credit card in consistent increments, rather than trying to clear it in one lump sum. This enables you to steadily move towards paying off your outstanding debt, without it having too much of an impact on your day-to-day life.
There’s a good chance that your credit card got a pretty good workout in the weeks leading up to Christmas. Make it your New Year’s resolution to wipe out this debt as quickly as possible to avoid incurring interest and fees in the months ahead.
Achieving your New Year’s resolutions is no easy feat, but by making small, practical changes to your lifestyle you’ll be better positioned to improve your money habits in 2016 and set yourself up for a more financially secure future.
What goals are you setting in 2016?