The key to making New Year’s resolutions stick is to make them clearly defined, do-able (by you) and personally meaningful.
Given the spectacularly short lives of New Year’s resolutions (anywhere between 1 week to 6 months, depending on who you ask), you’d think they would have fallen out of fashion sometime in the last decade.
However, it’s three weeks into 2018, and chances are you’re toying with some vague idea of what this year should look like for you. Well, if you’re serious about picking and sticking to a New Year’s resolution this time, here’s what you need to know.
To be Attainable, Resolutions Must Fulfill 3 Things
There are 3 main reasons why resolutions fail; they are too vague, too big, or too hollow.
Most resolutions sound like this: “Save money.” “Lose weight.” “Work harder.” “Travel more.” “Stop smoking.”
Each are worthy goals, no doubt about that. But they lack definition, scope, or emotional investment. How much money do you want to save, and by when? How much weight do you need to lose (if you even need to lose any)? Work harder? Why and how? Travel more… because everyone’s doing it? Stop smoking, by when…2359 31 Dec 2018?
To succeed, you have to define your resolution a little more, check that you can handle what it takes, and make sure it holds personal meaning for you. Otherwise, you’ll fail because you don’t know what where to start, can’t keep up with the demands, or won’t be able to scrounge up the motivation to keep at it.
So, instead of…
- “Save money”, say “I will save XXX dollars by DD/MM because (reasons)”
- “Lose weight”, say “I will lose X kg per month until I weigh YY kg”
- “Work harder”, say “I will put in however many hours of work needed for me to get promoted/increase my income by XXX dollars)
- “Travel more”, say “I will visit X new countries by the end of the year, in accordance with my passions and hobbies.”
- “Stop smoking”, say “I will cut down smoking by 1 cigarette per day until I stop completely.” or “I will only smoke when I am overseas.” (If you’re not a regular smoker and just want to stop wasting money on tobacco in Singapore.)
Money Resolutions to Try for 2018
Now, any resolution that is personally meaningful for you is a worthy one. But if you’re having trouble coming up with one, you won’t go wrong with picking a money resolution.
Here are 4 money resolutions we recommend you try.
Set a Retirement Goal
If you’re young, tt may seem strange to ponder something as far off as retirement. Afterall, you’re probably just starting to earn your own money!
Now, we’re not talking about having a full blown retirement plan, filled with all the details right down to which private island you’ll be lounging your days away.
Instead, just take a piece of paper, write down what age you want to retire, and in 3 sentences, describe the lifestyle you want to have by then. Also, work out an approximate monthly figure.
Keep this somewhere safe, and have a look at it once a year. If you want a more lavish lifestyle at retirement, adjust your retirement income upwards. However, don’t let yourself reduce the income goal you have set for yourself.
This is a very powerful resolution to have (especially for the young), because it prompts you to actively envision what your future should look like. It will also push you to discover what you need to do to have the retirement lifestyle you want, and motivate you to start good financial habits and practices.
Don’t underestimate the value and usefulness of this exercise. Afterall, you can’t achieve anything without first having that goal in mind.
Get Proper Insurance Cover
If you’re a new parent, or about to become one, pay close attention to this one.
Most new parents do a good job of keeping up with present financial needs, but many neglect the future. The fact is, when you start your own family, you have dependents that rely on your income earning power.
It is more crucial than ever to make sure you and your family get full and appropriate insurance cover. Your priority should be to get insurance for the highest earning parent, then the next parent, and finally the children.
Consider taking up term insurance for both parents (especially if you are both working) as well as an infant protection scheme. In fact, consider taking up a pregnancy plan with the option to transfer the coverage from mother to child upon birth. This will go a long way in saving you high medical bills.
While you’re at it, this is also a good time to start an endowment fund for your child. You can tag the plan to mature in 18 or 20 years, just in time to fund their university education. If not, you can always re-invest the endowment payout into other investment instruments.
Set Up an Investment Portfolio
Here’s an important rule for entrepreneurs and business investors: Keep your business and personal finances separate.
This is so that you can ensure your own personal financial goals are met, no matter how your business or investments goes. One good way to do this is to start a separate investment portfolio for yourself. Do not include your holdings in this portfolio.
As your business generates funds for you (whether in the form of a salary or dividends), remember to invest in your portfolio with the aim to grow it. Ideally, your personal investment portfolio should be sufficient to take care of your retirement needs.
And for your business, you should run it with the aim of growing it as its own entity, rather than rely on it to fund your retirement needs. This way, you have the option of leaving a viable business to your descendants, or selling it off at a healthy valuation.
Start an Automated Savings Plan
The younger you are, the higher chance you’re a part-timer or freelancer in the gig economy. No doubt, such arrangements confer a greater degree of freedom and flexibility, both in schedule and type of work.
But on the flipside, you may have to deal with inconsistent cashflow. Projects and assignments come and go, and you may experience insufficient income from time to time.
Ideally, the solution is to have savings you can fall back on during lean times, but with irregular paychecks, how can one build up the necessary reserves in the first place?
The answer is to start an automated savings plan to help you reach your financial goals. Maintain a current account into which clients pay, but set up a separate personal savings account to save up the money you need.
Start small, saving only what you can comfortably set aside initially. There’s no point transferring all your available funds, only to have to dip into your savings account when a project or two falls through.
Patience and consistency is key here, so automating the process will help; this will ensure you don’t “forget” to save, and spend the money instead.
A secondary strategy is to set a savings goal for the things you want to purchase. Say you allocate S$3,000 for a much-needed vacation. Increase the amount you automatically save until you reach the goal, then revert to your regular savings amount thereafter.
Resolutions Are Part Art, Part Science
You may have noticed that there are some very specific rules for something that is as personal as a New Year’s Resolutions. That’s because resolutions are actually a form of goal-setting, and experts have found some practices and methods that work well.
Just like with most things, practice makes perfect when it comes to resolutions, so don’t be discouraged if you find yourself failing to keep up. Just re-commit to your resolution and get back to it, and soon you’ll be knocking them out of the park!
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By Alevin Chan
A Certified Financial Planner with a curiosity about what makes people tick, Alevin’s mission is to help readers understand the psychology of money. He’s also on an ongoing quest to optimize happiness and enjoyment in his life.