As the year 2017 draws to an end and you look forward to a new year, making new resolutions must be weighing on your mind. Everyone likes new beginnings and people look for special occasions to make a new start. They are naturally motivated, just like a child is excited to have neat handwriting in a new notebook at the beginning of an academic term. Observe the parks or the gyms in your vicinity on January 1 of every year. You will see they would be comparatively more crowded than the previous month. This is the result of the new health resolutions being made for the new year.
But then the crowd would become normal after a few days. Resolutions are the most hyped or overrated thing to be decided upon on the brink of a new year. And majority of the people fail in keeping the resolutions, even till the end of January. Why does this happen? This has not just to do with the typical human tendency to procrastinate. People try to make drastic changes on a single day. Not just that, they expect instant results. When they dont, the momentum dies.
Any significant change to be brought about through a resolution requires time, perseverance and commitment. Motivation is of course necessary but what people need to realise is that it is not about making changes in your life through a resolution. It is more about changing a habit, replacing old habits with new ones. If you introspect, most of the activities that you perform during a day are a result of habit. And old habits die hard. It is natural to fall into routine again.
Resolutions thus serve little purpose and are pointless. Self-improvement should be continuous round the year and does not require special occasions to start.
This also applies to our personal finance lives. Making financial resolutions for a new year is futile. It is going to create little or no impact if you leave it half way. Further, quick fixes will not work to resolve your financial issues. For instance, you resolve to invest your money in the new year which is lying idle in the bank account for a long time. And, you do invest in the new year. But making an occasional investment just because your idle savings in the bank appear huge to you one day is no solution. The problem will arise again as your income will continue to pile up over the months.
Our financial situation is influenced by the money habits that we have inculcated over a period of time. For better or for worse, we indulge in them on a regular basis. For instance, spending all as soon as you earn, impulse buying, not having a budget, doing haphazard investments, getting a loan for every purchase, etc. Bad financial habits are difficult to get out of like our other automated behaviours. But the good thing about habits are they are malleable and can be replaced with better ones.
So, how can you put yourself on the path to a better financial life in the New Year?
For starters, think about that one bad money habit or a routine cycle which you want to break off from to improve your financial life. Take the example above of idle savings. At the beginning of a month, you pay your bills and a portion of it is then utilised over some weekends for shopping, dining, movies, etc. The balance keeps on piling in your account till it reaches a sizeable amount or until tax planning time when you invest it. But making a one-time random investment will not solve the problem. Amidst your busy schedule, you have harboured this habit of accumulating your savings and are not able to channelise it efficiently. How do you break this habit? You can automate your investments by linking it to your bank accounts. You can invest on a monthly basis in a mutual fund through a SIP, recurring deposit, fixed deposit, PPF or any postal scheme. You thus inculcate the discipline of investing on a regular basis and this becomes a good habit lifelong.
Keep your action plan as precise and realistic as possible. Mark your calendar with specific goals to reach by certain dates. This would make you more accountable and help in monitoring the progress. Make little changes in your weekend schedule to accommodate time for working on your finances. If it is a big time-consuming activity, you can break it in small parts and divide the tasks over couple of days. Once you taste success and triumph over an old money habit, you will set the momentum to perform similar financial tasks and achieve your goals.
Remember, changing your old financial habits would be an ongoing thing. It will take some time to have a beneficial impact on your overall finances. So, perseverance is essential along with the right intent. And not just at the start, but continuous round the year.
There is a popular saying by Aristotle – ‘We are what we repeatedly do.’
So, this new year, instead of making easy-to-forget resolutions, have a vision first about how you want your financial life to be. Then continually repeat the actions which would get you there. In short, gradually replace your old habits with new ones to shape your financial future the way you desire.
Wishing all our Readers a very Happy and Prosperous 2018.