Personal Finance Resolutions to Avoid this Year
Mr. ToughMoneyLove is not a fan of New Year’s Resolutions for two reasons. First, they are often used as an excuse to put off until tomorrow what could and should be done today. Second, New Year’s Resolutions perpetuate a fantasy that you are actually doing something when you are not. It’s like making a to-do list that never becomes an “I did that” list. If you resolve to pay your bills on time next year, how about paying them on time today?
1. I will spend less and save more next year. This is way too general and vague to be of any value. How much less will you spend? Where will you cut back? How will you cut back? If you can’t answer those questions with some details, just file this resolution next to the one that says “I will be a better person next year.”
2. I will reduce my debt next year. Again, not enough specificity. Which debt will you attack with a vengeance? How much do you intend to reduce that debt? What do you plan on doing with those credit cards that you are carrying around this year? Details please. Also, don’t make the mistake of thinking that a cash-out refinance of your mortgage is a debt reduction strategy.
3. I will make more money next year. This resolution is a problem for a different reason. Honestly, 2009 is not a year to be counting on making more money from your job. Instead, your focus (and resolution) should be on keeping your job and holding your ground in the income department. If you pull that one off, you will be doing better than several million other folks. If you resolve to earn a promotion next year, you are moving in the right direction.
4. I will make a [fill in the blank] % return on my investments next year. If by investments you are referring to stocks or stock mutual funds, and the number in the blank spot is a positive number above 4%, all I can say is good luck and I hope you succeed. I suggest that instead you determine what your personal rate of return was this year and resolve to do better than that next year. Then come up with new asset allocation or other plan to accomplish it. Or you could resolve to create a retirement emergency fund.
5. I will buy a new car next year. Why would you want to do that? A change in the year is certainly another lame excuse for buying a new car. Have you also resolved to have your present car die a complete and total vehicle death? Have you forgotten that there are bargains to be had in late model used cars? How about instead resolving to coax another year out of old faithful?
6. I will be a smarter money manager next year. Another vagueness problem. If you want to be a better money manager, get yourself educated, perhaps by resolving to read four books on personal finance next year. That’s specific, doable, and valuable.
7. I will win the lottery next year. I suppose this one doesn’t hurt except that you would have to purchase lottery tickets to succeed with this resolution. That’s a loser’s game.
What personal finance resolutions are you listing for 2009?
Image credit: Zoran