Financial management

4 steps to turn your money resolutions into reality

- January 24, 2023 4 MIN READ
money resolutions

The start of a new year is the traditional time to consider the changes you’d like to make in the months to come – perhaps lose some weight, cut back or give up the smokes or booze, and/or become a better money manager. Yet as the saying goes, talk is cheap. Sooner or later, resolutions made in moments of optimism will be tested, and it will be easy to backslide into old behaviours, writes professional investor Steve McKnight.

So, what’s the secret to transforming resolutions into reality? The answer is to turn intentions into plans.

An intention is really just a statement of purpose, a hope. A plan is an explanation that describes the path from now to then, the system or steps you’ll follow.

For instance, saying you hope to save more money or pay off some debt is an intention, and an intention alone won’t change much. Supporting your intention must be your plan – a description of how you will save more or how you will repay debt. An intention without a plan is just a dream.

Four steps to success

A Steveism to remember is this: Let the what and why determine the how and when.

What is the resolution. Why is the reason for wanting to make a change. How is the strategy, and When is the timing. Put them all together and you will have a compelling reason to begin, and sufficient momentum to overcome temptation.

For example, let’s say you want to save more money. Here are the four steps to work through:

money savings coins graphic

Step 1: Be specific

Specify how much you’d like to save, and by when. For instance, save $2,000 by 30 June.

Step 2: Describe why saving that money needs to be a higher priority than spending it

This is essential as you will need a reason for saving (i.e. delaying gratification) that is more compelling than spending (i.e. instant gratification).

For instance, your Why might be to have enough money available to pay your car insurance on time. It is worthwhile contemplating what might happen if you don’t achieve your goal. In this case, if you can’t afford your car insurance then you won’t be able to drive and will be forced to catch public transport. Considering the downside can help to add more motivation.

Step 3: Make a plan

Detail your plan for how you are going to save money, either by earning more or spending less. This is probably going to require some form of money management.

As I explain in my book Money Magnet, experience reveals that allowances are more beneficial and practical than budgets. That is, nominate amounts for what you are allowed to spend. For example, you might be currently spending $100 a month on various streaming services. If you set an allowance of $50 a month you could still enjoy some platforms, and at the same time save $300 (i.e. $50 × 6 months) towards your goal.

Step 4: Commit to a start date

And ideally, the sooner the better. That said, you’re more likely to be successful if you remove as many obstacles as possible before beginning.

Listen to Steve McKnight’s top money magnet tips on the Flying Solo podcast:

Beware tests and temptations

Here’s a cautionary word of warning … your resolution will almost certainly be tested, and when it does you will need to decide whether the outcome you are trying to achieve is a must or only a maybe. The difference between the two is how compelling the outcome is in your mind – is it preferable, or essential?

This is when you will need to choose whether your resolution is a ‘should’ or a ‘will’. If you end up saying I should do this, or I should do that, then you risk ‘shoulding’ all over yourself. The thing about willpower is you need to have the will before you’ll get the power.

Above all else, nothing will change unless you act and implement your plan. Start small and enjoy some easy and quick wins. For instance, what can you do to save $20 this week? Up it to $25 the following week, then $30 the next week, and so on. Before you know it, you’ll have money saved and momentum propelling you forward.

Ask yourself this …

Where do you see yourself in January 2024? In what areas of life will you have ‘levelled up’ by making changes to unlock improvements? What will you do differently? Why? When will you start?

These are all important considerations because the more you do of what you’ve done, the more you’ll get of what you’ve got. If you want to change the output (i.e. your outcome), first change the input (i.e. your behaviour).

Wishing you every success for 2023 and beyond.

This article was first published on Kochie’s Business Builders, read the original here.

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“Cast a vision for a different financial future”: Steve McKnight on building meaningful wealth

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