New Years Financial Resolutions

Published:December 31, 2019 | YOU!, Finance 理財視野

ACHIEVABLE FINANCIAL NEW YEARS RESOLUTIONS

New Year is here! Complete with optimistic excitement for the adventures ahead.
Maybe we’ll improve our financial habits this year; we could spend less on clothes and coffee, start applying a budget, or increase our savings strategy!

This year could be the best year we’ve ever had – if we add a dose of practical magic to the optimism pie.

The success secret? Setting incremental goals and giving ourselves more time to do them.
The simple reason: we inherently suffer from optimism bias .

Yes, that’s actually a thing! (Scientists said so. Psychology and stuff.)

It’s great for keeping us striving, but means we chronically underestimate the time it’ll take to complete tasks. This ‘planning fallacy’ phenomenon is well documented.

Hofstadter’s law states ‘any task you’re planning to complete will always take longer than expected – even when Hofstadter’s law is taken into account.’

And the way to avoid this?
Oxford University says the trick is to plan in less detail and ask ourselves roughly how long this type of task has taken us (or others) before.

The reality may be double or triple the time we think. But more accurate.

This knowledge is useful to apply if we have time-sensitive goals to tackle, because completing early is better than late.

For example, we might want to get our finances in order this new year.
We decide we’ll start budgeting and in a few months be streamlined and organised.

In reality it’ll likely take us 3-6 months to figure out what budget works for us, put it into place, make a mess of it a few times, tweak it to fit and then apply for the rest of the year.

And that’s okay! If we consider timing realities, we can reach achievable success.

The alternative is scrambling for deadlines that were unrealistic to begin with, causing unintentional stress, frustration or abandoning of the goal.

Even at full steam ahead, our financial (and other) goals may take longer than expected.

So let’s set achievable New Years Financial Resolutions, and succeed!

GOAL : Set behaviour based goals. Focus on sequential steps; implement staggered actions based on checkpoints, not time.

Example : Becoming a budgeting queen from scratch!

Checkpoints to complete sequentially :
1. Research budget styles to consider. (50/30/20 budget is a good starter.)
2. Track daily spending for one week. 3. Continue tracking daily spending for the whole month.
4. Keep going for 3 months, making small improvements as needed.
5. Next 3 months onwards – decide on a budget style (if any), tweak & experiment, decrease unnecessary spending.
6. After 12 months of budgeting – keep it up! Reflect on biggest challenge points of the year. Anticipate regular annual events (birthdays, holidays, travel.)

Example : Increasing monthly savings strategy!

Checkpoints to complete sequentially :
1. Research types of budget, consider what might be suitable.
2. Start tracking daily spending, see which budget styles may fit.
3. Continue spend tracking, notice areas that could be decreased.
4. Start easing back on unnecessary expenses and track the difference for 1-3 months.
5. Allocate the difference to savings. Observe if amount is sustainable over following months.
6. Repeat steps 3-5 until desired monthly savings habits are achieved.

“Views and opinions expressed by Mrs. Money Mindset are the solely that of the author and should not be considered professional financial advice. Any action taken from this advice is strictly at your own risk. We will not be liable for any losses or damages in connection with the use of this information, or any other information posted on this website.”

– Written exclusively for WELL, Magazine Asia by Mrs. Money Mindset