BY DON MILNE
Financial Literacy Manager, Zions Bank
What is your New Year’s financial resolution for 2013? Start using a budget? Pay off debt? Save more for retirement? Fat chance that is going to happen.
The 2013 New Year’s Resolutions Survey by Franklin Covey found that respondents’ No. 2 goal for the year ahead is to “improve financial situation,” just after “become more physically fit.”
Every January, millions of Americans resolve to go to the gym, go on a diet, and go on a budget. Two weeks later they are sitting on the couch, munching a bag of chips, and ordering stuff they don’t need from a crazy infomercial. Why does this happen?
The New York Times bestseller “Switch: How to Change Things When Change Is Hard” by Chip and Dan Heath explains why people have a tough time keeping resolutions.
As they explain it, your mind is like a rider on a four-ton elephant. The rider is rational and knows what is logical (exercise more, lose weight, spend less), but the elephant is emotional and does what is easy and feels good.
The key to making changes stick is to get your elephant trained to embrace needed changes. The best way to do this is to make changes that are automatic or motivating.
Here are three suggestions that will help you keep more of your money in your pocket.
Use Cash for Food Purchases
Ever let an elephant loose in the grocery store? It is not a pretty sight. It is far too easy for the elephant to overspend and overdraft. You are better off carrying around a food money envelope, with cash dedicated for grocery expenses.
But when it’s gone, it’s gone — Knowing that there is a limit to what you can spend makes you more careful on what you buy. It is not unusual for people who switch to this system to save 15 percent or more on their food budget. Over a year, that’s the equivalent of nearly two months of food.
Use Direct Deposit and Autotransfers
Don’t tempt your elephant to go on a spending spree by cashing your paycheck in person. It is safer, faster and free to have your employer deposit your paycheck directly into your checking account.
Your bank can also set up automatic transfers each month to savings and retirement accounts. If you schedule savings upfront and automatically, your elephant can’t spend it first.
Pay Off Your Smallest Debt First
Common sense says you should pay your high-interest debt first. But you will keep your elephant motivated if you focus on paying off your smallest debt first. Seeing fewer bills in the mail each month will keep your excited about your progress. With each small debt paid off, you have more money to use to pay off the next smallest debt.
No resolution is fail-proof, but these three suggestions are time-tested and work. Give them a try and enjoy the benefits from adopting these great elephant-proof habits.
We want your comments, which you can post below this article. What New Year’s financial resolutions have worked for you?