People Fail at Financial New Year's Resolutions

As the end of the year draws near, it’s a widespread custom for individuals to make internal promises, and call these promises “New Year’s resolutions.” The end of the year is a good time to look back on the past twelve months and determine what aspects of life did not live up to expectations and resolve to improve those facets in the coming year. Does it really work? Not for many, particularly when it comes to some of the more important resolutions.

For the sake of argument, let’s say that financial resolutions count among the more important resolutions. According to Harris Interactive, 58% of people who make New Year’s resolutions include a goal pertaining to their financial situation. Part of the problem that leads to a 51% failure rate within one month is that these resolutions aren’t really goals at all.

Even those who take resolutions more seriously than others — the others are the ones who make drunken declarations on New Year’s Eve with noisemakers and champagne — don’t take time to think about how their success will be measured or how attainable their resolution will be. The important resolutions, and remember we’ve already determined that the financial resolutions are important, shouldn’t be resolutions at all — they should be specific, measurable, attainable, realistic, and timely. (Yes, that’s “SMART,” the oft-cited acronym in the world of corporate decision-making and brainwashing.)

The most popular financial resolutions, according to the same Harris Interactive survey cited by Michelle Singletary of the Washington Post, are in order of popularity, saving more, paying off debt, and reducing spending. As I mentioned above, a little more than half of these resolutions are abandoned within a month; it stands to reason that a majority are abandoned by the time people are making resolutions for the following year.

Resolutions should be reserved for things you don’t really need to accomplish. Leave the declarations broad, like “I intend to lose weight this year.” Don’t say how much weight you intend to lose; that would start bordering on a goal rather than a resolution. If losing weight were important to you, you’d have a plan for doing so. The things that are important to you should be declared with specific goals, if not following the full SMART metaphor, then at least specific.

In the Washington Post article mentioned above, the author profiled four families that successfully improved their financial picture after resolving to do so. They had more than just resolutions. They had plans, they sought help, and they tracked their progress. Without these important factors, a resolution will simply carry over and be the same resolution the following year.

I’m a prime example. Each year, I resolve to myself to improve my physical condition, lose some weight, and get in shape. It never happens because I don’t plan well. I will start an exercise and stay with it for a few weeks, but it doesn’t take much of an interruption for me to drive myself off course. I did well sticking with my financial goals for 2007 because I wrote them down (and published them online), had a plan, and stuck with it. When I set my 2008 goals in the next few weeks, I will be looking at other aspects of my life other than financial. No resolutions, however; they’re meaningless.