Sorting out the household finances is one of the most popular New Year’s resolutions. This year, in particular, it’s a priority for millions of people as the rising cost of living bites deeper.
But most likely, within weeks, these plans will have been abandoned in favour of old behaviours as financial resolutions are hard to stick to, however good the intentions.
That’s why we have asked a panel of money coaches and experts for tips on making financial resolutions that stand the test of time.
A goal makes saving easier, especially if it is positive and realistic
1. Don’t give up before you’ve even started
Financial resolutions are so frequently broken that it may feel futile to even bother making one. But there is a special momentum at this time of year that is worth galvanising – so long as it is done in the right way.
Elisabeth Costa is managing director of the Behavioural Insights Team, a consultancy which advises businesses and Governments.
She says: ‘There is a phenomenon called the ‘fresh start effect’. At certain timely moments – like the New Year or when we move house or start a job – we have a rush of motivation to make changes.’
The trick, she says, is to use this burst of motivation to commit yourself to achievable goals.
2. Don’t rely on self-motivation
Where some people come unstuck is by making resolutions that rely on willpower. Costa explains: ‘The key is to embed the change that you want in a way that doesn’t rely on ongoing behaviour change and consistent motivation.’
So, for example, if you are resolved to save more money, you could set up a standing order from your current to your savings account every month for the amount you wish to save. That way, it happens automatically without you having to make a decision every month to save.
You could do the same with your credit card so that you automatically pay off the balance every month instead of having to decide when and how much to clear.
Some banks, such as Monzo, NatWest and Chase, allow you to round up payments to the nearest pound – with the extra pennies put into your savings account. This is another good way to automate savings.
3. Save for a particular goal
A goal makes saving easier. Ali Poulton, a head coach at Octopus MoneyCoach, says: ‘A popular resolution is to save more. But what is ‘more’? When will you know that you’ve succeeded?’ She adds: ‘Make goals specific and with a set time in mind. So, for example, save £1,200 by the end of the year. Now you have a target you can work towards.’
Costa adds that if you want some additional ongoing motivation, print a picture of what you are saving for and stick it on your fridge as a reminder.
4. Positive resolutions are easier to stick to
Positive goals are easier to stick to than negative ones, says Costa. For example, ‘I will bring my lunch into work’ works better than ‘I will not buy any new clothes’. Similarly, ‘I will put aside £10 this week’ is more effective than ‘I will not spend as much this week’.
Make it harder to buy on impulse, for example by not saving your bank details on your favourite retail websites
5. Make sure your goals are realistic
Make resolutions you stand a chance of keeping. We’re more likely to give up trying if we have unrealistic goals.
Mike Barrow, financial coach at Claro Wellbeing, says: ‘Setting unrealistic goals, or ones that are too restrictive, can have a negative impact on our personal wellbeing and could get in the way of progress.’
He adds: ‘If you are regularly struggling to afford certain things or failing to make progress towards a financial goal, reflect on how it is affecting your wellbeing and alter your goals accordingly.’
6. Make your new habit part of your identity
If you are someone who tends to overspend, start telling yourself you are a saver rather than a spender. Ali Poulton explains: ‘When you identify as a saver, you are more likely to stick to the savings habit. Sometimes just asking yourself ‘What would a saver do?’ can help.’
7. Make it harder to spend your money
Create friction to help prevent you from spending mindlessly. For example, don’t save your bank details on your favourite retail websites.
Instead, remove them so that you have to input them to make a payment.
Also, unsubscribe from newsletters issued by retailers so that you are not tempted by special offers on items you don’t really need.
8. Tackle a few areas of spending at a time
Rigorous tracking of your spending is a great way to monitor where your money is going – and where cutbacks can be made.
Rather than a scattergun approach, Barrow recommends picking a small number of expenditure categories to scrutinise at any one time.
He says: ‘For example, for the next three months, you could focus on tracking and cutting what you spend at the supermarket and eating out.
‘Then take note of how much you save.’
9. Make use of all the help that’s on hand
Improving our finances can be a slog – so make sure you take advantage of all the help available.
For instance, switch to a savings account that pays a competitive interest rate so that you are rewarded for saving. Take advantage of tax relief and employer contributions by saving as much as you can into a workplace pension.
Use cashback websites such as TopCashback or Quidco to get money back when you make purchases.
10 … and don’t be hard on yourself
If you fall off the resolution bandwagon, don’t beat yourself up – it happens to all of us.
Poulton says: ‘Just be sure to pick up your habit where you left off. We sometimes let perfect be the enemy of good. But progress wins over perfection every time.’