A year is built one day at a time. It’s the busy Tuesdays when you never have a moment and the lazy Sundays when you can finally relax.
Focusing on small, cumulative actions can take you far, whether you want to train for a marathon, clean out your garage or start a hobby. This is especially true for money goals, for which daily habits can have big payoffs.
But while New Year’s money resolutions are common -- with 84% of Americans setting money goals, according to a survey from NerdWallet conducted by The Harris Poll in 2017 -- so is abandoning them. More than 20% of those surveyed ditched their resolutions within two weeks, and over half failed to achieve some or all of their money goals.
You can beat the odds, though. To hit your big money goals in 2020, focus on months and days.
KNOW YOUR MONEY AND PICK YOUR GOAL
Do some initial research and get a detailed understanding of your cash flow, because you have a better chance of improving your finances when you know your starting point. The 50/30/20 budget, where half your income covers needs, 30% goes to wants and 20% goes to debt and savings, is an easy way to do that.
Use what you learn to decide on and write out your money resolution, getting as specific and realistic as you can. If you want to pay off your debt, for instance, list each account, its balance, monthly payment and interest rate.
“Whatever your goal is, it has to be trackable and quantitative,” says Levi Sanchez, founder of Seattle-based Millennial Wealth, a financial planning firm. “If you say you want to pay off your student loans this year, what does that really mean? How much will you pay each month?”
MAKE MONTHLY GOALS
Divide your goal into smaller tasks. List the actions you can take monthly and even weekly that will build up to you hitting your target by year-end.
“People treat resolutions like a sprint when really it’s a marathon,” says Lauren Anastasio, a certified financial planner at SoFi, an online lender. “Anytime you have a goal in mind, break it down into as many mini-goals as you can. You feel more accomplished and you have more momentum when you’re checking things off a to-do list.”
To build an emergency fund of $1,000, for example, you’ll need to save a little over $80 each month. Or if you’re set on conquering credit card debt, divide your current balance by 12 to see the monthly payment needed to meet that goal, with adjustments for any accruing interest charges if necessary.
BUILD DAILY HABITS
Your daily money management is the groundwork for achieving goals. Build habits that make accomplishing your monthly money tasks easier.
To get better at sticking to your budget, for example, set aside time at the end of each day to review what you spent and how well you followed your budget. Automate savings or debt payments to the extent that you can.
“A lot of building good money habits comes down to knowing your needs versus wants and having a spending plan so you know what obligations you’re meeting,” says Paul Golden, managing director of communications at the nonprofit National Endowment for Financial Education. “I’m a big fan of automating things so the habit is almost forced.”
GIVE YOURSELF A BREAK -- AND A REWARD
Life happens. You might set a certain debt payment, then your car’s transmission blows -- and drags your monthly budget down with it. Give yourself the flexibility to adjust the plan so you don’t just give up.
“One of the benefits of breaking the goal into mini-goals is that if you miss one piece, you don’t feel like you failed at the whole thing,” Anastasio says. “It’s always about how you frame the goals you set for yourself and giving yourself a clean slate at the beginning of each month.”
And reward yourself when you hit milestones, like choosing a robo-adviser to start investing with or having a month where you stick to your budget. Achieving money resolutions isn’t easy.
“I find people don’t celebrate the little things,” says Tania Brown, a Georgia-based certified financial planner. “A month where you didn't rack up any new credit card debt is huge.”