How to Stick to Your New Years Resolutions

Your Mind, Your Money

How to Stick to Your New Year's Resolutions

Set realistic, attainable goals, declare them publicly and develop a detailed action plan.

Nothing says “Happy New Year” like a promise to yourself to spend less and save more. In fact, “improving finances” came in right behind “losing weight” among New Year’s resolutions last year, according to John Norcross, a psychology professor at the University of Scranton and author of Changeology: 5 Steps to Realizing your Goals and Resolutions. An annual tally by Fidelity Investments found that a record 54% of consumers surveyed plan to make financial resolutions for 2014, with more than half of those vowing to save more. Nearly one in four are promising to pay off debt; nearly one in five are pledging to spend less.

See Also: 7 Money Confessions and Resolutions for the New Year

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A lot of resolution makers — typically 44% to 46% — are successful at the six-month mark, says Norcross. Still, that’s less than half. And although you’re just as likely to succeed at changing your money habits as you are in effecting other changes, there’s no denying that financial resolutions pose challenges. Savings goals are often abstract and decades away, investment decisions are complex, and memories of losses during the fin­ancial crisis are hard to overcome — all of which make it easier to put other things first. “Because of the tyranny of the present, financial needs for the future seldom climb to the top of the priority list today,” says Greg Davies, behavioral-finance chief at Barclays Wealth and Investment Management.

Increase your odds of success by adopting the practices of successful resolvers: Set realistic, attainable goals, declare them publicly, and develop a detailed action plan. Track your progress, and use the buddy system. Expect slip-ups, but don’t beat yourself up over them. Reward your successes (but don’t spend all the money you’ve saved!).


Take baby steps. It’s hard to commit to something indefinitely, but most of us can manage incremental change. Instead of “I’ll save more,” you might resolve that in January, say, or through the first quarter of the year, you will increase your saving by x amount. Or make a (short) list of things to accomplish by a set date: “By the end of January, I will have set up a retirement fund,” for example.

I asked Davies for the one financial resolution he would recommend this year. “Deploy your capital,” he said. Too many investors have been saving but not investing since the stock market bottomed in 2009.

Norcross’s advice: “No doubt about it — save now.” Start young, and let the power of compounding work its magic. Below is a short list of resolutions from other behavioral-finance experts:

Make savings automatic.
— Terrance Odean, finance professor at the University of California, Berkeley. Increase automatic contributions to your 401(k) account, or instruct your bank to put a portion of every paycheck into an IRA or other long-term savings account.


Create an enforcement mechanism.
— Meir Statman, finance professor at Santa Clara University. Buying a house creates forced savings as you pay the mortgage, for ex­ample. Statman also advocates mandatory private retirement savings.

Set up a routine to review investments and reallocate as needed.
— Richard Peterson, founder of research and consulting firm MarketPsych. Think of investments as a garden, with a time to sow, harvest and pull weeds.

Start using a financial planner.
— Victor Ricciardi, finance professor at Goucher College. A planner can help you develop a savings plan and address your overall financial situation.

Pick one of these resolutions, or choose your own. Good luck and happy New Year!