How To Pick A Resolution That Will Actually Stick

It’s that time of year! Resolution time. We usually like to start with some lofty goals and high ideals. It’s the month of extremism and abstinence.

I won’t spend money on anything for the whole month.

I will stop drinking forever.

I will not make any impulse purchases ever.

These are all dreams that are not actually realistic. We are humans. Humans have wants and desires that are hard to overcome and to do that we have to be realistic. Setting to large of a goal can actually lead to failure. It it easier to accept defeat when it was long-shot anyways. “Reach for the stars” and “aim big” are great tenants to live by but not very practical when actually choosing a goal and resolution that you want to reach.

Every big achievement starts with small baby steps.

Specific. Actionable. Measurable. Realistic. Lasting

Lasting- Choose something that is maintainable. Going on a spending fast is not going to get you anywhere concrete. It may help you for this month, but what about the next?

How do you choose a resolution that you will actually keep? Make sure it has some of the following characteristics:

Specific- big, sweeping statements sound nice and motivational but are not actually practical. I will not drink alone before 8 o’clock at night is a specific goal that solves a specific problem.

Actionable- Choosing to do something is easier than choosing NOT to do something. I will make myself coffee at home is easier to do, than I will NOT buy coffee at Starbucks.

Measurable- You need to be able to measure what you do do that you can celebrate when you do it. You need to be able to build on the positive momentum of your achievement. Create a goal that you can measure. Something subjective is not ideal because of the human tendency to create excuses. So “I will not make impulse purchases” can’t really be measured because who decides what is an “impulse”? I will not spend more than $50 is measurable, you either did or you didn’t. “I will make coffee at home for one week” is measurable.

Realistic- If the goal is unrealistic or too difficult than you will quit before you start. We don’t like failure so if the goal is never going to be reached we probably won’t try at all. You are probably not going to save 50% of your paycheck right off the bat. You probably won’t cut all impulse spending right away (if this is an issue for you). Some things that are more realistic? 5% or 10% of your paycheck should go to savings. Put $5 a month away in a retirement account. Set a budget for impulse purchases that is what you can afford but not too small that you blow it all on the first day.

Lasting- Can you pick something that will last the whole year? Choosing a goal or resolution that will last and be a real change in your lifestyle (forever?) should really be the point. After all, wouldn’t it be great if each year you make a change that can be build on the next year? Don’t pick something flashy that will make you burn out by February. Pick something small, meaningful, realistic and measurable that you can really do for the whole year!

Why I put $5 a Month into a Retirement Account

Why I put $5 a Month into a Retirement Account

What should I do if I don’t have enough money to save for retirement?

I’ve been working on building an emergency fund. Unfortunately there have been a lot of setback which means that its taking me a really, really long time. I don’t make a lot of money so putting money way is very, very hard. Putting money into a retirement account is not really happening right now. Yet, I still put $5 a month in. Why do I do that, you ask?

$5

Some Background:

Well, many years ago I was lucky enough to receive advice when I took my first job that I was smart enough to actually follow. At the time, I was fortunate enough to be living at my parent’s house rent-free so my expenses were really low and although my first job wasn’t paying tons I didn’t have to spend most of it. I met my personal finance teacher from high school who told me: Max out a Roth IRA as soon as you can. So I did. So I took her advice and saved up pretty quickly to open my Targeted Retirement account from Vanguard (a pretty basic and simple approach for anyone who is looking for a simple retirement account). Once the account is open with the initial minimum amount, you can deposit as little as you want (assuming you haven’t maxed it out- no worries there!). Most accounts have a pretty large initial balance so you would need to save up for that first.

After that first year, I moved out, got married, had kids and dealt with life. Saving got a lot harder especially since I hit a period of unemployment. I was and still am unable to put aside money for retirement. But… I decided to still put $5 a month into that account.

Why?

One reason is because of compound interest. I like to think that even the smallest amount will grow and make a small difference as I grow older. I may be able to put more later on, but at least this small amount will grow over the years. A little is better than none!

But ….The biggest and main reason is because:

Creating good financial habits is the key to successfully getting your financial life under control. Click To Tweet

The hardest part of creating a habit is beginning. And saving money must become a habit in order to be successful. (That’s why its best to start as young as possible. Parents: start teaching your kids to save now!!!).

Setting up an automatic deposit is the first step. And that is usually the hardest part. Fear can come into play. “What if I need the money now?” Laziness comes into play. “It’s too annoying, I’ll do it tomorrow.” Complacence comes into play. “I’ll have enough money to retire on when the time comes.”

Taking that first plunge is the hardest part. But once that first step is taken it is a lot easier to keep it going. Human beings work on inertia so stopping a habit is just as hard as starting for example, stopping an automatic deposit is just as difficult as starting an automatic deposit because all the same thoughts and excuses come into play (subscriptions anyone?).

Once I have more money to save (it will happen one day!) then adjusting the amount to be deposited is easier than setting up the deposit. I’m talking emotionally here- not physically! The habit has already been created- I will be just adjusting the amount. A much easier task! If I need to increase in really small increments I can do that as well! Slowly, month by month, that $5 is creating a habit that will be hard to stop. It’s making it so much easier to save even if the amount is negligible!

Sometimes it seems that small amounts don’t really make a difference. When we do the math it seems depressing. There are so many articles and blogs out there bashing the “latte factor”. But- when you do save, even the smallest amount, and you do resist the impulse to buy something (even if it’s cheap) you are creating habits that will hopefully last a lifetime.

Creating and maintaining good financial habits is the key to getting your financial life in order. It is what makes you spend and save responsibility even when your income increases. It is what helps you navigate every type of financial situation you may encounter.

And that is most definitely worth it!

Where should I put my savings? In your Savings Ladder!

What They Don’t Understand….

Living Paycheck to Paycheck

The thing with living paycheck to paycheck or with being poor is that you don’t have money. Everyone who is reading this is probably scratching their heads because it seems really obvious. And it is very obvious. No money=no money to spend. But there seems to be a subset of the population that doesn’t really understand what that really means.

What do I mean?

Take myself for example, by the current financial calculators I am classified as “low-income”. Not middle class- the one below that;). I, (thank G-d!) do not live below the poverty line but I am, by definition, poor. I do not like being poor so I am working on changing that. I work hard and I am slowly working my way up in my company. As a “side hustle” I decided to start a blog. Now, this is not a woe-is-me post but merely an example. I have not made any money from this blog (yet!) but I hopefully will. But that takes time, and not only time but money. There are hosting fees, for example. Now, I orginally started this blog using one hosting site. But when renewal came around, their prices were too expensive for me. So I decided to switch hosts to save on costs. This procedure requires more technical skill than my own rudimentary skills, and I couldn’t afford to hire someone to do it for me, so I had to rebuild my site. Instead of taking the time (this is all in addition to my full-time job and mothering duties) to build up my site,. Increase my reach, monetize my site etc. I had to spend time recreating the work I had already done. This all took double the amount of time because my computer is very slow and glitchy. This is because I have a very bad laptop. It constantly freezes and opening an internet tab takes approximately ten minutes. You can imagine how long it takes to find photos for my posts! I can’t afford another computer right now, even as an investment.

Which brings me to my point: poor people can’t really invest.

Investment is inherently risky. I can spend money on a new laptop in the hope that it will bring me more money but I really can’t be sure of that. I don’t know if I will make the money back-especially not in the time frame that I would need it. So I struggle with my old, creaky laptop and hopefully will slowly make the money to be able to buy a new one. Even though buying a new after laptop will help me make more money, of that doesn’t happen-the risk is to large for me to swallow. What’s a few hundred dollars, you ask? A lot. It’s a lot. It will literally take me MONTHS to set aside that amount of money.

Buying in Bulk- This is common advice that I see given to help people save money on food. The cost savings can be huge. BUT…. that is assuming that you have the money to lay out for it. Many don’t. Many people can’t lay out a large amount of cash-or blow their entire food budget on one ingredient that will save them money in the future. It’s too risky. They may not have the money to pay it back. The cost-savings may not turn out as great as initially perceived. Things go bad, things drop on the floor. Even if the investment is worth it, the emotional energy it takes to remember to “pay-back” the $5 you saved on rice can be too much for many people.

Why am I writing all this?

This is not a pity post or a sympathy post. This is an explaining post. This is explaining why we (the poor people of the world) are not taking your very good financial advice. Your financial advice is great but we can’t afford to take it. We can’t buy equipment for our side hustle. We can’t buy 3 months of rice in one go even though its cheaper. We can’t buy membership at Costco. We don’t have the money to buy this season for the next. We can’t buy solar panels or invest in large-minimum balance accounts. We want to. Maybe one day we will. It just is going to take us a longer time to get there.

Meanwhile, we are doing the best we can to stay out of debt and maybe build some savings. And maybe, just maybe, buy a new computer one day.