Already Struggling with Your Financial New Year’s Resolution?
Avoid These Common Pitfalls to Stay on Track and Finish Strong
Pitfall 1: Not Taking Action NOW to Do Better This Time Next Year
Almost a full month into the New Year, chances are you're once again in the same frustrating place financially as you were last year: still recovering from holiday spending and with a list of financial resolutions but no real plan for how you'll accomplish them. This does not have to be your reality.
I began conducting low-cost (and sometimes free) budgeting and personal finance 101 workshops 10 years ago. Among the individuals, couples, families, women’s groups and churches I coached, I discovered a common theme. All were successful, hardworking, and wanting to appear ‘in control.’ The reality, however, was that many were drowning in debt and some were just one or two paychecks away from the poverty line. They weren’t unique, as nearly 80% of Americans are living paycheck to paycheck.
After asking probing questions, combing through countless bank statements, and helping folks tackle psychological barriers with respect to money, I discovered something powerful. Many people thought they were budgeting but, had no real data to back up their variable expenses—those expenses that vary or fluctuate monthly (e.g., groceries, entertainment, etc.). I developed a R.E.A.L.I.S.T.I.C budget method that, if followed step-by-step, removes the guess work. For some, it creates savings anywhere from $300 - $500 when combined with simple lifestyle changes and a few cool budget hacks.
Saving Solutions R.E.A.L.I.S.T.I.C Budget Method is:
· Reflective of real-time data
· Easy to track
· Leaves room for flexibility
· Time bound
· Inclusive of all expenses
TAKE ACTION NOW: Check out our R.E.A.L.I.S.T.I.C Budget Method, a step-by-step approach that could save you anywhere from $300 - $500 a month.
Pitfall 2: Not Planning (and Saving) for Emergencies
The government shutdown is teaching us valuable lessons about the importance of planning (and saving) for emergencies. In 2008, following the recession and separation from my ex-husband, my world was flipped upside down. This was the first and only wakeup call I needed to reaffirm my commitment to having my financial house in order.
To get back on track, I used my R.E.A.L.I.S.T.I.C Budget Method to create $1,500 in my personal monthly savings. Of those savings, I redirected $500 to a money market account each pay period (2-3 times per month depending on the number of pay periods in each month). The money market account I had at the time wouldn’t allow me access to the funds for at least three days. This added measure of protection helped me truly define what constituted an emergency. By the time the next emergency came around—my first job loss in 2012—I had nine months of emergency reserves in the bank. Thank God, because it took me seven months to get back to work.
While financial experts can’t seem to agree on how many months of savings is appropriate (3, 6, 8 or 12), the general rule of thumb is 3-6. I’m conservative, so 8-12 months is more my speed.
Pitfall 3: Failing to Reward Yourself
When you’re putting in work, you want to see results while also having the capacity to occasionally treat yourself and others. Building a fun and tangible incentive into your personal finance plan will help you stay motivated on the journey and help you avoid overreliance on credit cards. One time of year when many people fall into financial trouble is during the holidays. To be financially equipped this holiday season, consider setting up a holiday bonus payday — a treat you will receive just ahead of the holidays this year!
Here’s how it works:
1. After creating a R.E.A.L.I.S.T.I.C 2019 budget, redirect $100 (or more) from each paycheck, starting this month (if possible), to be direct deposited into a savings account that you won’t see or touch (e.g. money market). Think of this as your ‘holiday bonus.’
2. Set a calendar reminder in your smartphone for the day of your first November 2019 pay period. Only at this time are you allowed to withdraw from your gift account.
3. Reap the reward of your discipline! Purchase holiday gifts from funds you’ve saved for this purpose throughout the year. No credit cards needed. No ‘robbing Peter to pay Paul!’