Happy New Year, everyone!
Are you excited to have a blank piece of paper in front of you for your 2018 resolutions?
Or is it a bit depressing as your list is much the same as last year… And last year half of them didn’t make it to mid-January and you didn’t stick to any of them for three months…
For 2018, go for SMART resolutions. SMART is a term from professional project management which helps people set project targets that actually help them to achieve the results they want, rather than ones that are just wishful thinking or are soon forgotten.
(If the term makes you groan because it’s used too much at your work, heave a deep sigh and still get on with this – because you know it’s better than not planning!)
SMART stands for Specific, Measurable, Aligned, Realistic, Timed. Which may sound rather difficult, theoretical and, well, boring. So here are some practical debt and money examples of how to get your resolutions right. And some on how not to do it as that’s often the easiest way to see what doesn’t work!
Make your resolutions Specific
Your target needs details. A resolution is something you have decided to do – not just a vague wish.
Pay off some debt isn’t specific enough: if your credit card debt has gone down £2000 in June but your overdraft is bigger have you achieved your goal or did you really mean clear all your debt? Decide what your debt targets should be in detail.
Pay off that Buy Now Pay Later catalogue purchase before I get hit with a huge amount of interest is Specific.
See if I can refinance my mortgage at a lower rate is Specific. Actually for anyone with a variable rate mortgage that could be what saves you the most money this year!
It’s a good plan to actually write your resolutions down. It doesn’t matter if this is on paper or in a Note on your mobile, just so you have a record of what you did decide.
If it’s Measurable you can see how you are doing
Save a house deposit isn’t measurable, it needs a number added to it.
Lots of debt and finance goals take a long while to achieve and you may have some bumps along the way. A big goal can be quickly shelved if a month doesn’t go well, so set the big goal but also come up with monthly sub-goals.
So Save £10,000 house deposit is measurable but Save a minimum of £500 every month and average £800 a month is much better because you can check each month if you are on target.
Aligned – with your partner’s ambitions
It’s cheaper and more fun living with someone – but it can really complicate financial planning unless you are lucky enough to share exactly the same goals in life and thoughts about how to get there.
If you have debts and your partner doesn’t, how are you going to pay them off? If saving for a house is your top priority but your partner doesn’t want to cut back on holidays and entertaining at all, it’s better to have a serious discussion and find a compromise. See His and hers – debts and relationship for more about this.
Not much point in a goal that isn’t Realistic
Save £500 a month and buy a house in the Autumn – there is a nice specific, measurable, timed goal. But if your credit record is rubbish and you are worried about your January credit card bill and your partner’s job is uncertain… well it’s not going to happen is it?
Keep things realistic by knowing what your current situation is:
- get a complete list of your debts, not just credit cards but also things like your overdraft, catalogue and car finance;
- have a look at your credit record. Even if this sounds scary, it’s better to know what the facts are;
- if you can’t pay off all your debt, can you reduce the interest?
If things are bad, be very realistic and get help sooner not later. If you try to muddle through, things will be worse in a few months time and you may have fewer options available. So don’t get deeper into debt, talk to a good debt advisor. And avoid firms that advertise that they can wipe out 80% of your debts.
Add a Time to goals and actions
Adding dates to targets helps to keep them realistic and measurable. That specific goal Pay off that Buy Now Pay Later catalogue purchase before I get hit with a huge amount of interest – this is the time to check exactly when the balance has to be paid off. Just one day late and you will probably be charged back interest for a whole year. And now you know it’s £400 by September 5th, you also know if you pay off £50 a month every month from January to August you will have met this target.
Some debt and finance goals are pretty quick to deal with – check out my Money Detox article for some ways to save money that won’t just save £30 this month but every month going forward. You could knock off a few of them in January and reap the benefits for the rest of 2018.
All feels like a bit much?
Perhaps you are thinking this feels like a lot of work … well there will be a lot more things written on your list, but they will be smaller and more practical. There is much better chance that your 2018 New Years Resolutions will work and you will still be sticking with them in a few months time if they are SMART to start with.