If you have made financial resolutions that you're going to try to meet in 2023, that's a smart and good first step. But the reason so many people say that they never follow through with their resolutions may be because they're not taking enough steps—or the right steps. In other words, if you really want to achieve your goals this year, you have to do more than make resolutions; you need a plan for achieving them. So if you're making financial resolutions in 2023, avoid these five mistakes to see success in the new year.
1. Making Financial Resolutions but Not Writing Them Down
Studies have shown that when you write down your goals, they're more likely to happen. Clearly, it's no guarantee; otherwise everybody would write down that they want to be millionaires, and we would all be millionaires. But writing down goals makes a lot of sense when you think about it. If you simply talk about your resolutions for the year, it becomes just that—talk.
Writing down your resolutions is the start of making a plan.
2. Not Getting SMART About Your Resolutions
SMART goal setting is a plan that a management guru, George T. Doran, devised in 1981, first writing about the concept in the publication Management Review. SMART stands for Specific, Measurable, Achievable, Realistic and Time-Bound.
It's wise to embrace SMART financial goals because following the concept will give you a blueprint for achieving your goals. For instance, let's say that your big 2023 resolution is that you want to save more money this year than you did last year.
That's a worthy resolution, but you can see how much better your odds of achieving it will be if you run that financial goal, "I want to save more money this year than I did last year," through the SMART algorithm first:
- Specific: Instead of solely deciding you're going to save more money this year, you'll probably be more successful if you write down that you will save 10% more of your income. Coming up with specifics forces you to be a little more ambitious.
- Measurable: This involves tracking your progress but also trying beforehand to come up with a strategy for achieving your goal. Before you can tell whether you're successful in saving 10% more of your income, you need to know how much you're saving now. Look through your bank statements and get a total, then include a dollar amount to reach for in your goal.
- Achievable: To achieve your goal, you need to put systems in place to help you along the way. For instance, if you want to save 10% more income than you did a year ago, setting up (or increasing by 10%) an automatic transfer from checking to savings every month (or from your paycheck) gives you both a way to achieve your goal and a means to track progress via your bank statements.
- Realistic: Part of setting yourself up for success is ensuring your goal is ambitious but not completely out of reach. You may start crunching numbers and realize that saving 10% more income is a little too much, and instead you're going to try for 5%. (Of course, you might also realize that your goal of saving 10% more income is a little too low, and you try for something higher.)
- Time-bound: This can keep a goal from stretching out indefinitely—or help you stay realistic if you realize that you can't achieve what you want to within a year. Whatever your financial goals, having a deadline should help to keep you focused and motivated.
3. Not Having an Accountability Buddy
This strategy isn't for everyone. Some people value their privacy and don't want to share their financial resolutions, or any goals, with friends. Others don't like the idea of announcing resolutions only to possibly later feel sheepish when they don't pan out.
But some people do well when they have somebody else to bounce ideas off of and share their progress on resolutions. If that's your type of personality, you'd do well to find a friend or family member who has similar financial goals so you can cheer each other on, and who can call you out when you miss the mark.
4. Not Working With a Financial Professional
Also not necessarily for everyone, depending on your situation. Still, it's worth considering.
Some people exercising at the gym, for example, work with fitness trainers. Most people selling or buying a house work with a real estate agent. They do this because most professionals know what they're doing. If your financial resolutions are going to require a lot of know-how, it may pay off to work with somebody who can help you achieve your goals.
So if you have a lot of money set aside and you're trying to work on improving your investments, you may want to work with a financial advisor. If you're mired in debt, and you haven't been able to make progress on getting out of it, you might want to work with a certified credit counselor at a nonprofit credit counseling service.
5. Giving Up Too Easily
Financial resolutions are often hard to achieve. That's why you make them, after all. You're tired of struggling with your cash flow or worried about what you're putting away, or not putting away, for retirement. So, you make financial resolutions. But after a while, once the newness of the year wears off, you may figure out you've gone nowhere with your resolutions and put them on ice until the next year.
Unless you're making very short-term goals (those that will take a month or two, at most, to achieve), prepare to be in it for the long haul and don't give up after a few months. Stick with it and you'll be surprised where you are in a year. Even falling a little short of your goal still means you worked toward it—and that counts as a win.
The Bottom lLine
Creating specific financial resolutions for the new year is a great idea, but it's also important to get a clear idea of your whole financial picture. Get your credit report and credit score, then check out the factors that most impact your credit score to find new areas of improvement. Even small changes, when paired with working toward your financial resolutions, can make a big impact.