Why New Year Money Resolutions Fail and A More Thoughtful Approach To Goal Setting

January 21, 2019 By: KELLIE MURUNGI

According to Statistica, saving money topped in 2018 new year’s resolutions. At least 53% of those polled said that they wanted to save more in the new year. I do not expect that it is any different in 2019. Even if you are not into new year resolutions, the clean slate of the new year often has us subconsciously wanting to do better than the previous year. After the excesses of December holidays, “I will be more disciplined with my money this year” is something that usually is on our minds as a new year begins. New year resolutions, however, get a bad rap because their failure rate is so high. According to the U.S. News & World Report, over 80% of new year resolutions fail by February. Does that mean we should stop making resolutions or at least setting goals? I do not think so. The quest for self-improvement is honorable, and the new year is a great time to start this journey. I, however, think we should stop doing a couple of things that set us up for failure.

  1. “New year new me” phenomenon; While the new year presents a temporal landmark and a great time for self-improvement goals, it does not mean we are in any way different from the people we were in the previous year. We often however set our financial goals without appreciating this fact. We are still the same and we have to keep this in mind when setting financial goals, otherwise, they will fail. If you have never saved money, it is not reasonable to say that starting January you will save 50% of your income. You are the same person who did not save anything last year, nothing has changed. This lofty goal simply sets you up for failure.

How to avoid “new year new me” phenomenon: Instead of going for big new goals and hoping for the best, downsize your ambitions a little bit. Pick just one area that you would want to change in the new year. Make it as bite-sized as possible. Want to start saving and you have never saved before? Start by aiming for 10% of your income. Or even 5%. The most important thing here is to make the change small so that it is easy to adopt. Once you achieve that, revise your goal upwards, until you get to the 50% which is your ultimate goal.

  1. Trying to change too many things at the same time: The end of the year can come with a lot of self-critique. You look back and see all the things you could have done better and resolve change them in the new year. It does not help that everyone around us seems busy making great plans for the year, creating vision boards, getting onto workout and savings challenges. While this can be positive pressure, it can also cause us to try too many things at once.

Spent too much time on the couch watching Netflix?  No Netflix in the new year!

Gained 5kgs last year? This year I will hit the gym 4 times a week!

Closed the year in debt? This year I will pay off all my debt!

Overspent during the holidays? By next December, I will have a holiday fund of 100,000 shillings to avoid this overspending madness!

Instead of trying to change everything, try a sustainable alternative: It is not surprising that when we try too many new things, we end up burning out and abandoning all attempts to change things. While life is indeed too short, it is long enough for us to take our time learning and improving ourselves slowly. Depending on who you listen to, it takes between 90 to 120 days for a new habit to fully form. It is therefore advisable to pick 3 major areas you would like to change about how you manage your money, and then work on each area per quarter. When planning, do not just look at the result you desire, say, paying off your debt. Consider the process it will take for you to get there. To pay off debt, you will need some extra cash to be able to do so. Will you:

  1. Earn more?
  2. Stop buying some things that cost too much?
  3. Adopt habits that save you money e.g carrying lunch to work, going out less, not impulse shopping etc?

If you need to do three things differently to achieve your goal, tackle each one of them at a time, adding a new activity once you have mastered the previous one.

  1. Relying too much on willpower: Willpower is great when we first start out on our goals. It gives us the motivation and energy to start off. But willpower is also finite. As the year progresses and life gets busy, it is quickly eroded. This is why we all start exercising with great energy but taper off before February. Money habits are no different. If you rely on your willpower, you will probably save for a couple of months, then taper out when more interesting things to spend money on come up.

Instead of depending on your willpower: Take willpower out of the equation by automating your savings. Secondly, re-orient your life to avoid temptations to spend.

Resolved to save 10% of your income? Set up a standing order so that as soon as your salary hits the bank account, 10% goes to your savings or investments account.

Have you racked up mobile loans on all apps? Delete them.

Got too much credit card debt? Cut them up.

Planning to go out less this year? Make other plans to meet with friends that do not involve as much money. You will still need friends.

In conclusion, new year resolutions are not inherently bad. Many people have transformed their lives by resolving to do things differently. My exhortation is that we spend just a bit more time thinking them through, before starting to implement change.  On the converse, the new year is not magical in any way. You can follow this advice anytime you feel the need to make improvements in your life, and it will work.