Make Your Resolutions Work

How often have you drawn up an ambitious list of new year's resolutions, only to find you've given up on them after a few weeks? Don't let that happen to you in 2006. If you want to make significant strides toward achieving your financial goals, determine why your resolutions have failed in the past and find ways to overcome those obstacles.

We make resolutions because we really want to change some aspect of our lives. However, the reason we have to make resolutions is because it is difficult to get these things accomplished. If it were easy, those things would already be done. Thus, if you want to achieve your resolutions, follow these tips:

• Put your resolutions in writing.
  Doing so will go a long way in helping you achieve those resolutions - it is estimated that people who make resolutions are 10 times more likely to alter their lives than those who don't make resolutions (Source: Money, January 2005).
  
  
• Make your resolutions specific and achievable.
  Rather than making vague or very broad resolutions, set smaller goals you know you can reach. Once you achieve these smaller goals, you may find it easier to pursue more substantial goals.
  
  
• Don't expect perfection.
  Changing any behavior is tough, and you should expect that you might slip along the way. Don't use that as an excuse to abandon your goals. Shake it off and keep pursuing your goals.
  
  

If you're looking to shape up your finances, consider these resolutions:

• Spend less than you earn.
  The amount of money left over for saving is a direct result of your lifestyle. Since you will typically want to continue the same lifestyle after retirement, your lifestyle decisions will impact you now and in the future. To get a grip on your spending, take time to analyze your expenses and to set a budget. Try reducing nonessential expenditures or find ways to spend less money on the same things.
  
  
• Save the money before you see it.
  If you have to find money every month to save, you'll probably find there isn't much left after paying all the bills. Typically, a better strategy is to set up an automatic savings program where money is automatically deducted from your bank account every month and deposited directly in an investment account. Another good alternative is to sign up for your company's 401(k) plan, having funds withdrawn every paycheck. (Remember that an automatic investing program, such as dollar cost averaging, does not assure a profit or protect against a loss in declining markets. Since such a strategy involves periodic investment, consider your financial ability and willingness to continue purchases through periods of low price levels.)
  
  
• Don't let debt sabotage your goals.
  If a significant portion of your income is going to pay interest on loans, you'll have less available for saving. Strive to eliminate all debt except your mortgage. Pay cash for all purchases so you don't incur additional debt. Pay down your existing debts by using additional funds to pay off the debt with the highest interest rate. Once that debt is paid in full, start paying down the debt with the next highest interest rate, continuing until all your debt is paid in full.
  
  
• Invest, don't just save.
  The ultimate value of your investment portfolio is a function of two factors - how much you save and how much you earn on those savings. Become comfortable with various investment alternatives, so you'll feel more comfortable investing in more aggressive alternatives that offer potentially higher rates of return. Even small differences in your long-term rate of return can significantly impact the ultimate size of your savings.