Whether you have vowed to save more, pay off your debt or spend less, you have probably made your financial resolutions for 2015. Unfortunately the odds are against you. Most people actually fail to keep their resolutions, falling off the wagon as early as the first few weeks.

Do you have what it takes to beat the odds? Where do you stand?

This is a great time to assess your situation and determine if you have set yourself up for success or if you need to make some adjustments.

Before we get into the steps, let’s consider Justin’s situation:

Justin recently made his resolutions for 2015. One of his resolutions is to save money. For the past two years, saving was at the top of his list. Unfortunately, he has been unsuccessful. Although he had vowed to save more money the past two years, he did not make any real effort to do so.
This year, he is set on fulfilling his saving resolution.
Justin made a list of all his assets (e.g. land, house, savings) and all his liabilities (e.g. mortgages, credit cards). Then, he subtracted his total liabilities from his total assets to determine his net worth.  

After reviewing his financial situation, he realised that his nest egg was not as large as he had hoped as he nears retirement. Justin is motivated to work hard to build his retirement fund and used the SMART mnemonic to craft his resolution into a financial goal:

Specific

Measurable

Achievable

Realistic

Time-sensitive

Instead of committing to saving money, Justin has resolved to save $5,000 by 15th December towards his retirement fund.

Justin then reviewed his budget to see where he could cut back on spending and increase his savings. He has included a fixed amount in his monthly budget towards his retirement fund. This year, Justin has also committed to evaluating his progress throughout the year to ensure that he fulfills his resolution.

Will Justin succeed?

The truth is…we don’t know. It is too early to tell. But, he is on the right track. Justin has gone beyond just vowing to save more this year. He is taking control of his finances and taking proactive steps towards improving his financial situation.  Justin’s approach mirrors that of the few who are likely to successfully accomplish their new year’s resolutions.

As you evaluate your progress and your new year’s resolutions, you may consider doing what Justin did to increase your odds of succeeding (if you have not already done so).

First, determine your net worth. According to Investopedia.com, net worth is defined as “the value of everything you own [(assets)], minus all your debts [(liabilities)].” This exercise can be very daunting, as it causes you to really see the full picture of your financial situation (i.e. whether or not you are in good financial health). But, in order to improve your circumstances, you must first know where you stand.

Then, you want to ensure that you have made a resolution that is specific, measurable, achievable, realistic and time-sensitive (SMART!). You also need to plan how you will succeed.  Setting the resolution is only one part of the equation.  You should track your spending and budget to determine how much money you can consistently and realistically put towards your goal.  You may consider utilising direct debit or even opening a new account solely for the purpose of ensuring that money is consistently put aside every month towards your goal.

Lastly, you should schedule specific times in the year to evaluate your progress. While a monthly evaluation may be too frequent, bi-annual evaluations may be too seldom. Find a healthy balance between the two, say quarterly. Be sure to also evaluate your progress during key times (e.g. unexpected circumstances, changes in income). Where necessary, modify your goal.

It is never too late to take control of your finances and set yourself up for success in 2015. With a few adjustments to your new year’s resolutions, dedication and discipline, you can improve your chances of beating the odds.

Some financial resolutions you may wish to consider

Below is a list of some general financial resolutions that you can tailor based your financial situation. Remember to set SMART goals!

1.     Pay off consumer debt.
2.     Build an emergency fund.
3.     Build a retirement fund (factoring in inflation of course).
4.     Invest to earn additional money.
5.     Put aside at least 10% of your pretax income aside for long-term.