Did you make any New Year’s financial resolutions? If you did, have you kept them?
Like improving your diet or getting more exercise I think changing your financial attitude and behaviours are tough things to do. I should know because we’re trying to improve ourselves. For example, we want to be better savers; cut down our mortgage debt and also build up our emergency fund in 2011. Those processes aren’t going very well (yet) but more on that in a bit. On the positive side, while it took us a few years to get some financial goals in place, we’ve now getting on track. Last year was the first year we made a concerted effort to get organized and it worked out in the end. In 2010, we not only maximized our TFSAs, we cleaned-up our RRSP accounts (used ETFs instead of mutual funds), optimized our RRSPs and took a great trip. We also put some lump sum payments on our old mortgage. It was a great year overall.
Starting new financial behaviours are tough, keeping them going is equally challenging. Here are a few reasons why your New Year’s financial resolutions may have bombed already:
1. Unrealistic Goals
Any goal-setting endeavour needs to be SMART: Specific, Measurable, Attainable, Realistic and Time-Oriented. It can be great to set a goal that’s high, to give you motivation to attain it, but if it’s too high then you won’t see or feel any progress which can be crushing. I think most goals should be stretch assignments, just beyond today’s reach. With a new place there are lots of expenses, I don’t need to list them for you because I’m sure you’ve moved enough yourself and you know what they are. Beyond initial big ticket items like appliances and window treatments in December, we’ve had to install a second sump pump, a toilet (that failed) and fix our Heat Recovery Ventilation (HRV) system. Those items alone weren’t too costly but they added up to tidy sum together. One of our goals was to build a healthy emergency fund for 2011 but that target seems out of reach for this year since many of the “what ifs” in life became a reality. All this to say I think our emergency fund target was a little aggressive. We’ll still try and build our emergency fund but it might be considerably less than we thought it would be.
2. Thinking Negatively
What good comes from thinking negatively? Close to nothing in my opinion. Negativity breeds negativity. Easy to say you won’t think this way but hard not to do sometimes. I struggle with this from time to time since when I mess up, I tend to be pretty hard on myself. Mistakes happen, bad things happen and I’m not perfect. Live and learn and smile on are good rules of thumb. There is certainly more power in positive thinking and so I encourage you to try it as much as you can. That includes your financial goals.
3. Ignoring Any Progress
If you have made some SMART goals and you’re working through them, make sure you don’t forget another “M”, Monitor. It’s important to monitor your progress and give yourself some positive reinforcement when you accomplish some milestones on your path or a kick in the pants when things get rough. Recently, I’ve been a little down myself given all the things we need to fix and now maintain in this new home. Broken toilets and backup sump pumps aside, we also needed to install a new roof this spring. We knew about lifting shingles on the home when we bought it in October 2010 but that installation didn’t make the financial commitment for this work any easier to digest. That said, I have to remind myself of all the things WE HAVE done and the progress we’ve made for only being in the house for five months. Sure, some fixes were unexpected but advances have been made to make our house to make it a much better home. We need to take pride in that. Ignoring any progress you make on your financial objectives is important as well. Celebrate all victories big and small.
4. Lack of Sharing
One of the best known ways to keep yourself on course, for anything in life, is to tell someone about your goals. Find a friend, a family member, a co-worker or if you’re like me, do all the above AND start a blog AND tell everyone 😉 If you communicate on a regular basis with like-minded people or folks who are interested in your goals, chances are you have a much better chance to achieve them. Sharing your goals will keep them top of mind. If you haven’t shared your financial goals with anyone yet, you’re already fighting an uphill battle. I feel fortunate to interact frequently with some pretty savvy investors (and savers) in the blogosphere and this financial community has certainly inspired me to become a better investor. Pressure is always helpful, especially when folks are reading my decisions and actions.
If you want to know more about the power of sharing as part of goal setting check out Millionaire Teacher Andrew Hallam. Andrew had an excellent post dedicated to this topic.
Recognizing we can never do everything we want all at once, my wife and I have decided to strike a balance in 2011; live for today, make our house a home and take small steps at paying off the mortgage. No doubt we’ve experienced some unexpected events since moving into our home but life is like that; just when you think things are clear and under control it quickly changes on you and the needle moves. In the end, plans are good but if those goals are unrealistic, you have a negative attitude, successes aren’t celebrated and goals are never shared, whatever is working probably won’t be for long.
Then again, maybe you never got started with any resolutions in the first place???
Why do you think financial resolutions fail?
Do you have financial goals that are doomed to fail in 2011?
Conversely, have you already exceeded your expectations?
As always, share your thoughts!
My Own Advisor