There weren’t many empty parking spaces at the gym this morning. The exercise studios were packed and every machine and weight station had someone on it with others lined up waiting their turn. For gym regulars, it is a temporary inconvenience as all of the New Year’s resolutions to get in better shape result in a couple of weeks of crowds before returning to normal by February.
Similarly, financial goals to get in better financial shape are also common. Commitments to get out of debt, save more, and spend less are almost as popular as dropping a few pounds. Those resolutions have one other similarity, they will mostly fail. According to research from the University of Scranton[i], only 8% of people actually realize their New Year’s goals.
In my opinion, there are three reasons why most people fail. By knowing these mistakes you can better position yourself for success in 2016.
Mistake # 1 – Setting unrealistic goals.
Most of us do not have the body type to achieve the sculpted bodies we see on the covers of fitness magazines. Yet we become disappointed when a few trips to the gym or days of dieting fail to make a noticeable difference.
It may not take a genetic lottery ticket to buff up your finances but most folks won’t get out of debt or save a fortune by making drastic commitments to change that they aren’t prepared to make. For example, if you eat out every meal, it is probably because you either don’t know how to cook or don’t have the time. Instead of resolving to “stop eating out”, maybe a more reasonable commitment to prepare 2-3 meals per week is attainable. If you can save $5 per meal for 3 meals per week, you will have “saved” $780 by year end that otherwise would have been spent on take out.
Mistake # 2 – Not being specific about what you want to accomplish.
Just about everyone wants to lose weight or grow their money. Those are great aspirations, but they aren’t very good goals.
A pound of fat is equal to about 3,500 calories. If you want to lose a pound, you need to burn 3,500 more calories than you take in. You can do that by eating less, exercising more, or some combination of the two. Instead of saying that losing weight is your goal, aspire to burn 500 more or take in 500 fewer calories per day and you should lose about 1 pound per week.
Consider a dollar invested to earn around 10%, which is about the average return of the US stock market over the past century. A person in their 20s could see that dollar double 5 times to $32 by the time they reach their 60s. One IRA contribution of $5,500 would grow to $176,000 over that span at that rate. A goal of saving about $15 per day would add up to that IRA contribution.
Mistake # 3 – Not being accountable.
The key to taking responsibility for anything is defining who will do what by when. At work, we are assigned tasks with deadlines and know that there are consequences both for success and failure.
When dealing with personal issues, this can be accomplished by sharing our goals with friends and family. I once proclaimed to a house of party guests that I was going to run a marathon the following year. Most of those friends and acquaintances probably didn’t even remember my boast the following day, but the potential embarrassment of someone calling me out at the next year’s Christmas party if I didn’t follow through was enough to motivate me to start training and see it through.
I refer to what we do at ATX Portfolio Advisors as Accountable Wealth Management℠. In addition to offering financial plans to all of our clients that allow us to determine who will do what by when, we also commit to sharing the pain by waiving our advisory fee when your investments with us drop in value. It’s that accountability that we believe will help you stay the course when the road gets rocky on the way to ultimately achieving your goals and resolutions.
If you could use some help with your financial resolutions, get in touch. Happy New Year!
[i]Source: University of Scranton. Journal of Clinical PsychologyPublished: 12.13.2012