Make – and Keep – Your Financial Resolution

SMITH BRAIN TRUST – “A New Year’s Resolution is a promise to yourself,” Maryland Smith’s Elinda F. Kiss says. “Don’t make too many. Two or three are fine.”

Kiss says recommends making resolutions about your financial health. “Pay yourself first. Save early and often. Retirement is sooner than you think, and most people have not saved enough,” she says.

Fewer and fewer employers offer defined benefit contributions, so it’s up to employees to supplement their social security with their own savings. “If your employer has a 401(k) or 403(b) plan, you should contribute to it – at least to the amount of the employer’s match,” she says. “The employer’s match is ‘free money’ to you.”

For employees who don’t have access to a 401(k) or 403(b) at work, she recommends self-funding your retirement with an IRA.

“Besides saving in a retirement vehicle, also put aside more money as savings,” says Kiss, an associate clinical professor of finance at the University of Maryland’s Robert H. Smith School of Business. “I recommend a stock index fund such as total stock market index with no load fees. Or a balanced fund if you are risk averse.”

Besides setting up a budget and saving for retirement and big purchase items, such as a down payment for a house or a child’s education, there are other financial resolutions you can make.

Learn how to set up a budget: Websites such as mint.com can help you manage your money. Other sites, such as smartaboutmoney.org offer courses on money basics, including determining your tolerance for financial risk.

Take a personal finance course. Learn how to balance your checkbook, if you don’t already do that. Learn the importance of paying down your debt, and make a resolution to do that. “All of these are good financial resolutions,” she says..

Be patient. “Don’t beat yourself up if you break the resolution. Just start again. And re-save.” Kiss recommends writing down your resolutions somewhere handy. Have a look at them when you are tempted to stray from your resolve.

Enlist a resolution buddy: A solid support system can make it easier to stick to resolutions, so consider having a resolution buddy. “If your resolution is very important to your health or financial health, and you need someone to remind you of your resolution, then yes, have a resolution buddy. Having a support system makes it easier to stick to resolutions.” It’s one of the reasons why weight loss programs, such as Weight Watchers, have been successful in helping people lose weight. Such programs also reward positive behavior – peer recognition when you have lost five or ten pounds.

Plan a small indulgence. As you work to improve your financial picture, also make a resolution that rewards your effort, Kiss says. Add stars in your booklet with every small milestone. Treat yourself to small indulgences. Those positive reinforcements can help you to keep your resolution and stick to your goal. “But I think the most important part of the resolution is to have fun with it,” she says. “Enjoy the discipline, but also reward yourself for the good behavior.”

And add fun resolution: In addition to your financial resolution, make a fun resolution that is easy to keep, Kiss says. “Some examples: I will have a piece of chocolate once a week. Or I will take a walk. Or go to a play or a museum or a sporting event. Or I will hug my children and/or spouse more.” It will keep you on track and remind you that all of your resolutions aim to make you happier.