Three crucial steps to making new year resolutions work

I am all for New Year’s Resolutions. Cynics may scoff that January 1st is just another day in an arbitrary human calendar, but they’d be better off resolving to be more open-minded in the New Year.

The fact is goals work, whether you’re trying to lose weight or get rich.

Some goals work better than others, though – so here’s three tips to making resolutions deliver what you promise.

1. Make resolutions you really care about

Don’t make a laundry list of the tweaks that you believe would lead to some perfect life. It won’t work.

You’re trying to change yourself with these resolutions – about the hardest thing a person can do. Treat the challenge with the respect it deserves.

Pick at most three goals that would make the biggest, most positive impact in your life. Financially, you might vow to:

• Get out of debt (the number one priority!)
• Create a secondary income stream that delivers £500 a month
• Ensure you’re on track to a prosperous retirement
• Get over the fear of investing in the stock market

The ideal goal excites you when you think about achieving it, but feels a little daunting – which is exactly why you’ve backed away from it before.

You want to stretch to get somewhere worth reaching.

2. Be specific: Aim for the goal, but focus on the journey

A powerful goal is important, but the key to achieving it is the choices and steps you make every day.

If you decide “My goal is to lose weight and save money by eating out less” while enjoying a meal at your favourite Indian restaurant – fashioning your third Naan bread into a mini-snowplough to mop up the last of the chicken korma sauce – and then celebrate your decision by returning to the same place at the weekend, then you’re not serious and you’ll fail.

Don’t let yourself down before you start. Translate your big goals into small, actionable steps that you can carry out each day to achieve your aim.

For example, you might breakdown the goal of ensuring you’re on-track for retirement as follows:

• Work out your net worth
• In a spreadsheet (or tool), divide that net worth into different asset classes
• Factor in any regular savings you already make
• Calculate how your investments could grow with average returns by retirement age
• (A) Estimate the annual income the final sum could generate (4% of the total is a good benchmark)
• (B) Estimate what state retirement benefits you can also expect
• Add A and B together to get your retirement income estimate
• If it’s not enough, figure out how much more you need to save.

Most people will find A+B is less than a seaside cottage and all the cream scones they can eat, which is where the goal becomes an action plan:

• Find an extra £250 a month, either by earning more or spending less
• Open an index tracker fund in a tax-exempt account (such as an ISA)
• Contribute £250 a month to the tracker until retirement (re-balancing towards bonds in the final years)
• Resolve to keep buying every month, regardless of bear markets

3. Little setbacks are better than big failures

Human beings seem wedded to failure.

We all slip-up – I work less than I plan to, get out of the city less than I vow to, and still haven’t learned to sail or scuba dive. If robots ever take over the world, they’ll do it by following the program, rather than immediately heading to the pub instead.

Since you’re going to have setbacks – spending too much one month, or eating a cake too many – you have to get into the mindset that small failures are okay, provided the bigger mission is still on track.

The weak, scared and self-defeating part of yourself would just love to get you off the hook by throwing in the towel. Don’t let it.

Instead, calmly accept you’re human. Look squarely at your setback for what it was – a small skirmish in a battle you’ve vowed to win.

Give a nod to your human frailties, then focus on the target and succeed!

(Image by: Clairity)

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