Issue Date: December 7, 2003
Set your 2004 financial goals
Let me help you stick to those upcoming New Year's resolutions with these simple, wallet-friendly tips.
By Jean Chatzky
Focus on a reward -- maybe a trip, a car or a better credit score. You'll be less likely to backslide.
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Americans' No. 1 New Year's resolution for 2003 was to get a grip on their money, from reducing credit card debt to building overall fiscal fitness, according to several surveys.
John C. Norcross, a University of Scranton psychology professor and co-author of "Changing for Good," has studied resolution makers and found that after two weeks, 29% of people falter. After a month, it's 36%, and after three months, a full 50% have given up.
Still, Norcross -- who prefers to see the glass as half full -- emphasizes that making clear resolutions is 10 times better than not making any at all; only 4% of people he studied managed to change their behavior without resolutions. His research also shows that certain tactics help people make resolutions stick:
Have a specific action plan. You may say, "I'd like to contribute to an IRA this year," or "I'd like to pay down my Visa." But those are blanket statements, not practical goals. To make them tangible, you need to attach real numbers. How much do you want to contribute to the IRA -- $1,000, $2,000 or even more? Do you want to wipe out your credit card debt, or will paying off half suffice? Setting a start date is "a potent predictor of who makes it and who doesn't," Norcross says.
Break goals into achievable parts. If you want to put away $2,000 in your IRA, that's roughly $166 a month, or -- if you're paid twice a month -- $83 per pay period. Same with the Visa card: Look at how much debt you have, and decide how much to add to each monthly payment to eliminate the balance.
Think positively. Successful resolution makers don't focus on breaking old habits; they focus on adopting new, helpful ones. For example, instead of saying, "I'm not going to overspend," which emphasizes the negative, say, "I'm going to create and follow a budget." And there are financial tools to help you do just that. If you're having trouble paying bills on time, arrange with creditors -- from health clubs to utilities -- to automatically debit your checking account each month. That way, you won't incur late fees, and you will stick to your resolution. Likewise, if your resolution is to save more, have money automatically funneled from your paycheck into a savings account, brokerage account or retirement account, like a 401(k) or IRA.
Steer clear of temptation. Sometimes you need to alter your environment to help meet goals, Norcross says. If you know your weakness is a shoe store near your office, take a different route to work. If you are paying off credit cards, then remove them from your wallet and use a debit card instead. That will force you to think twice before spending, because the funds come directly from your checking account.
Alert your friends. If you've always been a free-spending sort, changing your ways may confuse your inner circle unless you let them know what you're trying to accomplish. By confiding your goals -- or even agreeing with a friend that you'll work toward these goals together -- chances are the people in your life will support rather than sabotage you. Interestingly, Norcross' studies have shown this step isn't important right after setting goals, but two or three months out, people who have social support are much more successful at reaching those goals.
Remember the reward. Maybe you are saving for a cruise. Perhaps paying down credit card debt means an extra $200 a month in your pocket instead of in interest charges. And if you pay your bills on time and boost your credit score, you can get a much better rate on a mortgage. When you lack reasons to change, it's easier to fall back into bad habits.
If you backslide, give yourself a second chance. Many people slip up sometime in January, shortly after making their resolutions. One way to get back on track is to note just how much you can accomplish with the time left on the calendar. If your aim was to save $100 each month and it's now June, you can still rack up a tidy sum before 2005. I'd call that progress.
Contributing Editor Jean Chatzky is the author of "You Don't Have to Be Rich" (Penguin, $23.95). Additional reporting by Brian B. Reid.
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