Setting New Year’s resolutions may be a breeze but pulling them off is another story. CreditFresh shares goal setting tips to help you achieve yours in 2020.
We’re on the other side of the New Year — in a brand new decade no less — so you want to make your resolutions count. Not sure what you want to achieve? We recommend checking in with these helpful financial resources if you need inspiration for your next financial goal.
But let’s be honest — goal setting is an illusive skill for many of us. Research rom the University of Scranton conducted in 2018 shows just eight percent of goal-setters actually achieve what they want.
And the rest? They tend to bail on goals relatively early.
Last year, the fateful day for some was Saturday, January 12, barely two weeks into 2019. This comes from Strava, a social fitness network. Strava analyzed more than 31.5 million activity uploads from their app to determine the day motivation waned for many of its users.
And what about non-fitness related motivation? Surprisingly, the drive to succeed outlasts many of the social fitness junkies we just read about. U.S. News Reports says roughly 80 percent of goal-setters give up by the second week of February.
In either case, it doesn’t look good; the odds are stacked against you.
But why is that so few people can grab onto success with two hands? Well, it’s simple. A lot of people aren’t making attainable resolutions.
Why Does Goal Setting Fail?
No, it’s not because the stars were improperly aligned when you started saving, dieting, or exercising. The reasons why goal setting fails has practical answers.
Generally, unsuccessful goal setting has one or more of these things in common:
- A vague objective
- An impractical plan
- A reliance on willpower alone
1. An Imprecise Goal is a Hard-to-Achieve Goal
In terms of financial goal setting, most lists look something like this:
- Save more
- Spend less
- Pay off debt
- Increase credit score
While running the gamut of financial intentions, these goals have one thing in common: they’re vague!
On the surface, there’s a lot of missing information here. It leaves all these important questions unanswered.
- How much more do you want to save?
- How much less do you want to spend?
- What date do you want to pay off your debt?
- What credit score do you want to achieve?
- More still, when do you plan to reach these goals?
Once you take a deep dive into each of these objectives, you’ll find there are even more questions you need to answer.
Let’s take spending less as an example. Roughly 51 percent of U.S. goal setters commit to saving money following the holidays. But with a population of around 330 million, this goal can’t possibly mean the same thing for everyone.
To make sure your goal setting fits your unique needs and expectations, you’re going to have to get specific. Add detail to make the goal personal to you and your situation — not a generic goal gracing a top 10 spot of many New Year’s resolutions lists across the country.
Your chances of reaching your aim to “spend less” will be easier when you know:
- What expenses and spending habits you want to change
- The dollar value you hope to shave off
- How often you want to save this amount
- The actions you’ll take to reach this goal
- What you’ll do with the cash you save
Once you start getting into the nitty-gritty, you’ll realize you can break down your main goal into several opportunities to spend less.
Let’s say you want to spend $20 less on your monthly grocery bill. If you go grocery shopping four times a month, that’s just $5 per trip. From there, you can take a look at your list to see what you can eliminate or what coupons you can use to shave five dollars off your total.
These mini objectives fall under the main umbrella of your goal, but they’re easier to visualize and achieve because they’re small, actionable, and detailed.
Achieving these smaller targets go a long way to keeping you on track.
2. Overly Ambitious Goal Setting Dooms Resolutions
A new year represents a fresh start that inspires change. All this extra energy and blind optimism may convince you to commit to some pretty big goals.
And so, it’s without irony some people pledge to highly aspirational and possibly unattainable goals.
You know the kind. Master a new language in three months? Impressive! Saving 99 percent of your paycheck? That’d be nice. Working out for two hours before work every morning? Who needs sleep, anyway?
While your motivation levels are high, these tasks seem doable. But once the winter blahs of February arrive, it’s not easy holding onto this get-up-and-go attitude.
To avoid a slump that leads to feelings of guilt and failure, scaling your intentions to your abilities is key. You want to tweak your grand ambitions so that they are both achievable and realistic given your resources and time.
If you’re a smoke, an example would be moving your target from quitting cold turkey to cutting how many cigarettes you smoke in half.
3. Using Brute Force to Achieve Your Goals
Plenty of New Year’s resolutions hinge on restriction: resist the temptation to eat sweets, don’t sleep through your morning exercise class, or don’t spend all your money on a shopping spree.
Popular wisdom may imply that you need to turn your back on instant gratification if you want to achieve long term goals. By sacrificing pleasures now — i.e., eating that snack or sleeping in — you’re more likely to have a well-balanced diet or chiseled abs later.
But this may not be true. People may be more likely to stick with their goals when they balance long-term rewards with immediate ones.
It’s hard to resist every temptation while you wait for the big pay-off, after all.
It’s why so many dieters swearing off all carbs and sugar drop their restrictive meal plan for snacks and fast food. Or why smokers hoping to quit fall off the bandwagon. Resisting all temptations rather than a few choice ones wears away your self-control until you have nothing left.
Rather than simply pushing through, figuring out how to incorporate immediate rewards along the way may help you stick with your goals.
To put it in another way, indulge in a snack or sleep-in occasionally — within reason of course! Nutritionists recommend dieters incorporate cheat meals (or whole days) into their plans, so they don’t give in and pig out unexpectedly. Some addiction specialists say smokers who turn to nicotine gum, patches, and e-cigarettes stand a greater chance of success than people quitting cold turkey.
Focusing on small rewards may keep your energy up as you commit to bigger sacrifices.
How Does This Work with Setting Common Financial Goals?
So far, what we know about successful goal setting is:
- Your goals need to be well-defined
- Your goals need to be practical
- You shouldn’t rely on inexhaustible self-control to “win”
How does this fit into common financial New Year’s resolutions like saving more and building credit history?
Let’s find out!
Turning “Saving More” into an Actionable Resolution
To be your most successful at “saving more”, you’ll need to find out what “more” realistically looks like to you.
If you aren’t sure, the 50/20/30 budgeting rule provides a good introductory framework. According to this rule, you should divide your paycheck into three categories:
- Needs: Representing 50 percent of your income, needs include things like groceries, housing costs, and insurance.
- Wants: Takeout, entertainment, travel, and other fun expenses should take up no more than 30 percent of your income.
- Savings: This leaves 20 percent of your income for savings.
How do you shape up?
If your percentage are off, look to your spending to see what you can reduce or eliminate. Any cash you free up can go towards your savings.
Just be careful — eliminating everything but your absolute necessities is hard to sustain long-term. All work and no play makes Jack and Jill break their budgets.
Balancing cost-efficacy with fun is a challenge, but it’s doable! Try takeout for example. Here are some ideas if you plan on cutting out ready-made meals and restaurant outings:
- Cut all but one takeout meal a month. Keeping this lunch or dinner will feel like the treat that takeout should be.
- Find an affordable meal plan packed with dinners that taste better than boring old takeout. Experiment with flavors and recipes from around the world.
- Get friends and family involved. A monthly potluck event where everyone shares a meal together replaces the reward of takeout with the reward of eating with loved ones.
Dropping something as simple as takeout could save the average American roughly $3,000 each year. Squirreling away this amount — and more when you target other expenses — may help you avoid running out of money.
Running out of money is a nail-biting experience, yet it happens to a lot of people. A Bankrate study shows one in four people have no emergency savings.
Without emergency savings, you have nothing standing as a buffer between you and an unexpected emergency expense. A lack of a safety net is why some people get an online line of credit in an unexpected emergency.
While a personal line of credit may help in special circumstances, it isn’t a stand-in should you run out of money when paying regular bills. An option like this should only ever be used for unexpected emergency expenses.
Reframe “Improving Your Credit Score” as a Realistic Goal
Improving your credit score is a popular New Year’s resolution , but it’s one that’s often misunderstood. It doesn’t help that a cursory look online recommends fairly unattainable goals.
Open a new tab to your favorite search engine, and you’ll find results like:
- How to raise credit score instantly
- How to raise credit score by 200 points
- How to raise credit score in 30 days
By our goal setting rules above, these have some of the makings of well-defined goals, either by time or points. But they don’t check the next box. They aren’t realistic resolutions.
They speak in absolutes that aren’t possible to guarantee. Why? Because several factors go into generating your score. And your score is reliant on your past financial behaviors just as much as your future ones.
Generally speaking, bad borrowing behavior from old personal loan or line of credit products sticks around on your report for seven to ten years. Until then late payments, charge-offs, and other more serious credit no-nos may impact your history.
Following the “how to build credit” tips from your previous Google search may help add positive entries to your report. But they may not pull you ahead of any existing bad entries in your file. These positive entries may not produce the results you’re expecting until the bad entries fall off.
If you’re curious about how different entries work, read this to learn more about how your credit score is calculated.
How to Build Credit History
None of the information above is to say focusing on your credit health is a doomed resolution. It’s a great idea for anyone, no matter your walk of life. Whether you’re a student just starting out with building a credit history, someone looking to retire, or somewhere in between, building positive credit history is a part of good money management.
You just may need to reframe what you hope to achieve in 2020 if you had specific goals related to your credit score. Move away from a specific goal of how many points you’d like your score to increase by, and adding a certain date to this goal. Instead, focus on committing to long-term positive credit behavior.
Here are some tips to help you get started:
Find a way to pay bills on time
Paying bills on time adds positive payment history if your financial institution reports your payments. It also prevents negative payment history from being added to your file, even if your financial institution doesn’t normally report personal loan or line of credit payments.
Check your credit
Sometimes, inaccurate payment history and balance statements may impact your credit history unfairly. Checking your report will help you catch these mistakes. It may also help you protect your credit score from identity theft. Knowing what does and doesn’t belong on your file may help you catch the early warning signs of fraud.
Keep balances low
Maxing out a personal line of credit or credit card may impact your history negatively. While a credit utilization ratio of 30 percent or less is the general rule, you’ll want to try to use as little of your overall limit as possible.
Apply for personal loans or lines of credit sparingly
Sometimes, a financial institution may use a hard credit check to assess your creditworthiness before they issue a line of credit. Sometimes, they may use what’s called a soft check. Do you know the difference?
Depending on what company produces your credit report, they may impact your history the same! Limiting how often you apply for a line of credit — and therefore how often you undergo these checks — may help manage your history.
Don’t Give up!
Failure happens to the best of us. And in terms of New Year’s resolutions, it happens to most of us.
But failing to keep your New Year’s resolutions doesn’t have to be inevitable.
Focus on defined, practical goals, and go easy on yourself. Being too strict will do nothing but to discourage you. Boost your spirits with small and appropriate rewards. These little pick-me-ups may help you stay motivated despite the obstacle of changing a habit standing in your way.
Whatever you hope to accomplish in 2020, remember the tips you learned here today. And most importantly, keep up with financial curiosity. Understanding how your money works may help you make informed decisions when it comes to saving and building credit history.
Happy New Year from all of us here at CreditFresh! We hope it’s a successful one.
Disclaimer: This article provides general information only and does not constitute financial, legal or other professional advice. For full details, see CreditFresh’s Terms of Use.
Posted in: Lifestyle
