It can be exciting to leap into a new you . . . so long as you don’t fall into old habits.
It’s the first week of the New Year, and right now you have likely embarked on your New Year’s resolution. For some of us that’s diet or exercise, while others take on a new skill or plan to travel more. But for approximately half of us, that top New Year’s resolution is to save more money and be better about our finances.
When you begin to think about your finances, you likely start by taking a look at your credit card statements and then exclaiming “OH MY SWEET PETUNIAS WE ARE SPENDING TOO MUCH MONEY!” Without delay, you grab a notebook or get on your laptop and immediately start writing down what you’re spending on, how much money each bill is, maybe sorting it into categories, creating a fancy spreadsheet and then of course we need to color code the spreadsheet so we see in pixelated glory just how bad our spending really is (but there’s no reason why we cannot do that in a rainbow of digital paint options) and then about six hours later after hacking and slashing and not spending on anything anymore you exclaim “A Budget is Born” and, having solved that crisis of currency, you go to bed.
A couple of days later, you sleep in and end up running late for work, so on the way in you grab a Starbucks and a bagel, and you chastise yourself for it. The next day, you packed your lunch, but your work friends asked you to go with them out to eat, and you don’t want to be rude, so you leave your lunch in the work refrigerator and then forget it’s ever there. And then that weekend, wouldn’t you know it the shirt you looked at all holiday season is now at the lowest price you’ve ever seen, so it’d be a shame not to pick that up and a couple of other things you’ve needed to, since you’re there anyway. Within a couple of months, that budget that you poured sweat over and hacked and slashed and splashed rainbow colors on fades as a distant memory on a cloud (your Google drive).
But how did that happen? You made a budget and you tried to be so disciplined, so why didn’t the budget work?
I’ll give you a hint: Budgets do not change behavior.
The idea that just by making a budget you are going to save more money is akin to saying that you will play better golf because the hole is a par 4. You don’t score better because the expectation is lower – you score better by consistently practicing your swing, using good form, accounting for different environmental conditions, and making the best choices you can at each spot the ball goes. That’s what earns you a 4, or a 3, or a 10 on that hole.
Budgets do not change behavior. Budgets are the scorecard. They can help guide where you need to be to reach certain goals, like par does to a golf score on a round of 18 holes. It’s when you consistently practice better living habits, like deciding and following-through on spending less on discretionary purchases that will actually get you to the point where you save money. And just like any other skill, some days will be better than others. Some days, you’ll forget that lunch, and curse as you buy that meal in the workplace cafeteria. Don’t beat yourself up over it. Figure out why it happened, and create a better plan to avoid that situation again. You’ll make mistakes, and it’s by learning and not repeating those mistakes that, over time, your spending will decrease, and that’s when you’ll really start saving some money.
Some people have the personal willpower and discipline to attack these things on their own, but the success rate is not high. According to the University of Scranton, just 8% of New Year’s’ resolutions were actually successful, which means that there will be a healthy supply of people for me to send this blog post to in 2019. But in all seriousness, what it does demonstrate is that there is a great deal of power in accountability and in having a guide. Personal trainers do this for physical fitness, business coaches for sales and advertising, and there’s a reason why these industries exist – because they have been found to improve their client’s habits. If you feel like you are hitting a wall trying to save money or make better financial decisions, working with an adviser may be the key to overcoming your financial challenges.
Have a fantastic start to your 2018, and I will see you with the second edition of The Briggs Blog in early February!
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