IT’S NEARING THE END OF the year, and for many of Americans, that means it’s time to start putting together New Year’s resolutions. As many of us know from experience, resolutions often don’t last, and the reason for that is that resolutions are often just poorly stated goals.
A 2007 study from Dominican University of California by clinical psychologist Gail Matthews found several key elements of creating a powerful goal that can actually work. Here are five elements of an effective New Year’s resolution, inspired by Matthews’ research, and how to apply them to a common personal finance goal: Paying off credit card debt.
Create a goal that is focused on small, specific actions. A big goal such as paying off a debt sounds great, but it isn’t anything that you can take action on every day. A good goal points you directly toward some kind of step you can take every single day.
So instead of planning to repay your entire credit card bill by the year’s end, aim to put an extra dollar amount – say, $10 each month – toward repayment. This gives you something clear to do each day: You need to determine how to save $10. Obviously, some days you can save more, but setting a $10 minimum gets you to your goal by the end of the year.
Write down your goal. The act of writing down a goal makes it more likely that you’ll succeed at that goal. Writing things down by hand the old-fashioned way, with a pen on paper, is even more effective at lodging an idea in your mind, according to 2014 research in Psychological Science. So, the best approach might be to pull out a notebook and pen, write down your goal by hand and write down a brief plan for that goal. That simple act will increase the likelihood of success.
When working on paying off a credit card, for example, you’re more likely to succeed if you write down that goal and some of the steps you’re going to take to achieve it.
Tell trusted friends about your goal. The act of telling others about your goal makes it more likely that you’re going to succeed. That’s because you don’t want to appear to be a failure to your inner circle of friends. It applies social pressure, which is often enough to get you to succeed at your goal.
When working toward the credit card payoff goal example, announce to a few of your close friends that you’re trying to pay off your credit card, and your goal is to save $10 a day to apply to a big monthly payment. Ask for a bit of help and encouragement, and you’ll likely find that at least a few friends will privately cheer you on throughout the year.
Review your progress toward that goal frequently. This is all about accountability. Setting a goal is a great thing, but are you following through with it? Reviewing your progress frequently is a vital step. Set a weekly appointment for yourself on your calendar to review your ongoing resolutions and goals. Are you making progress? How can you make better progress in the coming week?
With a debt repayment goal, you can spend a bit of time each weekend – about 10 or 15 minutes – looking back at the last week for successes, missed opportunities and ideas for the week ahead. You might even end up adding things to your to-do list because of this new habit.
Have an accountability buddy. Ask a trusted friend to be your “accountability buddy,” meaning that you tell him or her each week how it’s going and allow your friend to ask you for an update once a week if you haven’t given one. This is a good role for a close friend who wants you to succeed. The desire to not report bad results will nudge you toward greater success. If you’re reviewing your progress, as suggested above, then this type of report is easy since it mimics the review you’ve already done.
For example, if you find an accountability buddy for your credit card goal, you might send a note that says this: “I canceled my cable plan this week, which will save about $60 a month, and I made a few meals for the freezer that will save about $10 apiece, so I’m ahead of the curve this week!” Or you can text, “I didn’t save as much as I wanted this week but I did go to the library instead of the bookstore to get that book I’ve been wanting to read, so that’s $10 saved.”
Together, these strategies can increase your success rate with a personal finance goal – or any goal – for the coming year.