Latest News: Technology |  Celebrity |  Movies |  Apple |  Cars |  Business |  Sports |  TV Shows |  Geek


Filed under: News


The 3 Pitfalls Likely To Derail Your Financial Resolutions

Jan 9 2014, 6:26am CST | by

10 Updates


Full Story

The 3 Pitfalls Likely To Derail Your Financial Resolutions

A couple of weeks ago, I suggested 14 possible financial New Year’s resolutions for 2014. Of course, the problem with New Year’s resolutions isn’t making them. It’s following through. One study showed that most resolutions don’t last past 6 months. Perhaps for that reason, over a third of people don’t even bother to make any.

While losing those last 5 lbs may feel like a lost cause, losing that last $5k in credit card debt may feel more urgent. So how can you make sure your financial resolutions stick and turn into lasting change? Here are some pitfalls to avoid:

1. Not setting SMART goals

One of the main reasons that New Year’s resolutions go unfulfilled is that they’re too vague. Saying you want to lose weight isn’t as good as saying you want to lose 10 pounds by the first day of summer. At the same time, those goals should be realistic. Setting a goal of losing 10 pounds in a week just sets you up for disappointment and discouragement.

The same is true for our financial resolutions. Each financial goal should be SMART (specific, measurable, attainable, realistic, and timely). Want to pay off debt? Build an emergency fund? Save more for retirement? How much and by when?

Finally, when setting realistic goals, keep in mind that we tend to overestimate what we can do in the short run and underestimate what we can accomplish in the long run. Set some lofty and inspiring long-term goals. Then break them down into manageable and achievable action steps.

2. Being paralyzed into inaction

In many ways, financial planning is really all about prioritization. After all, we have limited means to satisfy seemingly unlimited goals so we have to make trade-offs. Are you willing to spend less eating out now so that you can retire earlier in the future? Should you pay down debt or build up savings first? Is it worth taking more risk for a higher potential return on your investments?

But even the perfect financial plan is worthless if it’s not actually implemented, which too often is the case. Whether you’ve attended an educational workshop or had a customized plan put together by a personal financial advisor, it’s easy to feel overwhelmed by all the things you need to do. This is especially true if those actions steps involve making complex choices or if the benefit is delayed, which is usually the case in financial planning.

The key is to prioritize not just your money but your time, focus, and attention. Pick your top 3 goals for the year and focus on a small number of attainable action steps. A good financial planner can help here but if you’re on your own, here’s a guide to prioritizing your savings goals.

3. Ignoring future saving opportunities

Regardless of your financial priorities, chances are at least one of them involves saving more money. In fact, spending less and saving more was the most common financial resolution this year. Although there are a variety of relatively painless ways to reduce our spending, the reality is that too many of us just aren’t going to make those changes.

Fortunately, there is a potential solution . In a study by behavioral finance researchers Shlomo Benartzi and Richard Thaler of real retirement plan participants, only 28% of employees were willing to immediately increase their savings based on a financial advisor’s recommendation. However, 56% were willing to increase their savings by 3% per year in the future. More importantly, 80% kept their commitment after 4 years and they went up dramatically from a 3.5% savings rate to a 13.6% savings rate compared to the 8.8% savings rate of those who followed the advisor’s initial recommendation. This approach can be particularly useful if you have a lot of time and many peak earning years ahead of you.

Check to see if your retirement plan provider offers a feature called a “contribution rate escalator” in your retirement plan. If so, you can set the escalator to automatically increase your retirement plan contributions over time. If not, you’ll simply need to gradually increase your contribution rate each year. Either way, you probably won’t even feel it in your paycheck but pretty soon you might be saving more than you ever thought you could. In fact, there’s a book called The Automatic Millionaire that shares real stories of regular people who have become millionaires using this strategy.

Setting goals and creating a financial plan is just the first step. More important are the actions you take and the habits that eventually develop from them. That’s what causes lasting changes and avoids another year of New Year’s resolution disappointments.

Erik Carter, JD, CFP® is a senior resident financial planner at Financial Finesse , the leading provider of unbiased financial education for employers nationwide, delivered by on-staff CERTIFIED FINANCIAL PLANNER™ professionals. For additional financial tips and insights, follow Financial Finesse on Twitter  and become a fan on Facebook .

Source: Forbes


iPad Air Giveaway. Win a free iPad Air.

You Might Also Like


Sponsored Update

Update: 10

Selangor’s Watergate about to explode

Source: Malaysia Today

Anwar brought Wan Azmi to meet Khalid to try to resolve this matter. Anwar supports the RM2.5 billion claim but Khalid is stubbornly sticking to the figure of ...
Source: Malaysia Today   Full article at: Malaysia Today 3 hours ago


Update: 9

GLCs told to provide RM7 billion to develop Bumiputera firms

Source: Malaysia Today

EurAsia Cup presented by DRB-HICOM - Day One
(The Malaysian Insider) – Putrajaya has directed government-linked companies (GLC) to generate RM7 billion in business opportunities for Bumiputera firms this year, Prime Minister Prime Minister Datuk Seri Najib Razak... ...
Source: Malaysia Today   Full article at: Malaysia Today 6 days ago, 2:05am CDT

More From the Web

Update: 8

Rafizi shows proof of Putrajaya’s hand in contentious carpet-trader loan

Source: Malaysia Today

Eileen Ng, The Malaysian Insider PKR lawmaker Rafizi Ramli today revealed documents to prove Putrajaya interfered in the RM32 million Bank Rakyat loan to ‎controversial businessman ...
Source: Malaysia Today   Full article at: Malaysia Today 1 week ago, 2:16am CDT

Update: 7

PAS MP claims Bank Rakyat loaned carpet-trader RM215m, interest free

Source: Malaysia Today

(Malay Mail Online) – Controversial businessman Deepak Jaikishan (pic) was given a whopping RM215 million interest-free loan from state-owned Bank Rakyat, a PAS lawmaker alleged today, despite Putrajaya’s claims otherwise.... REA ...
Source: Malaysia Today   Full article at: Malaysia Today Jul 14 2014, 5:52am CDT

Update: 6

MRCB, Nusa Gapurna and PKNS settle suit over RM3 billion PJ Sentral project

Source: Malaysia Today

(The Malaysian Insider) – Malaysian Resources Corp Bhd (MRCB), Nusa Gapurna Development Sdn Bhd (NGD) and PKNS Holdings Sdn Bhd have reached an out-of-court settlement o ...
Source: Malaysia Today   Full article at: Malaysia Today Jun 21 2014, 2:53am CDT

Update: 5

Story behind Syed Mokhtar’s ‘RM2.25 billion tax-exempt’ Bernas deal revealed, says PKR MP

Source: Malaysia Today

(The Malaysian Insider) – An innocuous written reply in Parliament has provided a peek into the cosy relationship between the Najib administration and Malaysia’s best-known businessman, Tan Sri Syed Mokhtar... READ MORE ...
Source: Malaysia Today   Full article at: Malaysia Today Jun 15 2014, 12:56pm CDT

Update: 4

Constitutional monarchy still murky concept

Source: Malaysia Today

After the RM4.5 billion land sale, the Sultan of Johor secured a 15% stake in MOL Access Portal (MOL) for RM396 million and took a 20% stake ...
Source: Malaysia Today   Full article at: Malaysia Today Jun 14 2014, 12:37am CDT

Update: 3

Sultan of Johor’s RM4.5 bil backlash?

Source: Malaysia Today

"GOLDEN ASIA" Tokyo Premiere Press Conference
Has Sultan Ibrahim of Johor’s succession of big money deals over the last six months caused the tide of public opinion to turn against Johor’s royal palace? KiniBiz examines the... READ ...
Source: Malaysia Today   Full article at: Malaysia Today Jun 11 2014, 8:49am CDT

Update: 2

Putrajaya denies carpet dealer given interest-free loan

Source: Malaysia Today

Eileen Ng, The Malaysian Insider Putrajaya today refuted allegations that Bank Rakyat had allowed carpet dealer Deepak Jaikishan to repay a RM32 million loan without interest following interventi ...
Source: Malaysia Today   Full article at: Malaysia Today Jun 11 2014, 5:44am CDT

Update: 1

Malaysia Spends Over $9 million on MH370 Hunt: Report

Source: NDTV

"GOLDEN ASIA" Tokyo Premiere Press Conference
Malaysia has so far spent about RM27.6 million (over $9 million) on search operations for missing Malaysia Airlines flight MH370, an official said ...
Source: NDTV   Full article at: NDTV Jun 9 2014, 3:12am CDT

Shopping Deals


<a href="/latest_stories/all/all/31" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.




blog comments powered by Disqus

Latest stories

You Are Being Tracked Online By A Sneaky New Technology: Canvas Fingerprinting
You Are Being Tracked Online By A Sneaky New Technology: Canvas Fingerprinting
You are likely being tracked online by a sneaky, new technology that works without your consent, and can track you even if you use anti-tracking toolbars or strict privacy settings. How is this possible? Historically,...
The Hottest Bikini Photos from the Mercedes-Benz Fashion Week Swim 2015
The Hottest Bikini Photos from the Mercedes-Benz Fashion Week Swim 2015
The Mercedes-Benz Fashion Week Swim 2015 took place in Miami Beach, Florida this week and we have the hottest bikini photos from the runway for you. See the gallery below.
Cameron Diaz Disses Kyle upon Drew Barrymore Questions
Cameron Diaz Disses Kyle upon his Inappropriate Questions
Cameron Diaz recently dissed the interviewer Kyle Sandilands upon some of his inappropriate questions regarding Drew Barrymore and Benji Madden.
Lady Gaga Gets her Revenge via Instagram Photo
Lady Gaga Gets her Revenge via Instagram Photo
Lada Gaga was called fat by many cruel people. But she got her revenge via an Instagram photo which portrayed her in all her curvaceous and sexy self.

About the Geek Mind

Read more about The Geek Mind.