It’s a new year. A new year, and your bank account still only has a month’s worth of salary in it. This year, however, you’ve made a decision: you’re going to turn everything around, you’re going to start saving up, making more, and getting yourself out of the financial rut that you always seem to be in.
How’s that working out for you? If you’re like many other young people, doing all of that is far harder than making the resolution to do so. That said, it’s not impossible: many young people do it every year, and you can do it too. The problem, however, is often not your job, or your savings.
It’s you. It’s psychology. It’s simply a matter of adjusting your lifestyle and the way you view things in order to present a clear, comprehensive plan of how you’re going to tackle your financial woes and turn them into financial success.
1) Create a solid, detailed plan
It’s easy to resolve to improve your finances. Many people do it every year without actually doing anything to make it happen, and it’s possible that you’ve made such a resolution in years prior with a similar lack of success. It’s not enough to want to improve your finances – you need to have a solid, reliable, robust action plan in place to make that happen.
Everything must be accounted for. This includes not just the necessities – things like rent, food, and gas. This also includes things that you would consider discretionary or spontaneous: vacations, nights out, or dinner ordered in when you’re too tired to cook. It may sound counterintuitive, but you need to know just exactly how spontaneous you can be in any given month. Unpreparedness and spontaneity are the death of any good financial action plan.
Also, though this is advice given pretty much everywhere, it bears repeating: try and keep a reserve fund of at least three months’ worth of your salary. Remember: there are few true emergencies. There are simply things that you are not prepared to handle. With a strong, stable financial action plan and a proper reserve fund, you will find you are equipped to handle just about anything that comes your way.
2) Actually make a commitment
it’s easy to know what you have to do. In fact, everyone knows what you have to do: spend less, make more, save more, etc. and so forth. In fact, this is the sort of advice you can find everywhere, from your parents to any self-help blog on the Internet. But if you don’t do any of that, it’s as if you didn’t know what to do at all.
So actually commit. It can be small – for example, if part of your plan includes cutting back on credit card debt, don’t just say you’ll pay down the card and put it away, promising yourself you won’t use it. Cut it up. Cut it up into a dozen little pieces. Not only does this take away the temptation to use it. But is a physical, tangible reminder that you have committed to your financial improvement plan.
3) Don’t look to your successes. Look to your failures.
It’s a fact of human nature that we do not like to look at our failures. We much prefer to look at our successes, to look at all the things that we’ve done right and to pat ourselves on the back. The problem is, however, that we do not learn much from our successes. By definition, our successes are in fact where we can learn the least, where we can improve the least.
Our failures, however, are places where we can improve the most – even if they are the places we do not like to look at. Consider your financial resolutions of the previous year – which ones did you not meet? Which ones did you almost meet, and which ones were you not even close to completing? Look at those, and plan your angle of attack around them. It is in these failures, however painful to examine, that you will find the opportunity to actually improve their financial standings.
this is maybe the most intangible part of this entire action plan, but it may be the most important: once you have an action plan in place, once you’ve made commitments to keeping this action plan, you must remain strong. Do not let anything derail it.
If brunch with your friends will put you over your discretionary limit for the month, you have to decline. If a new nightclub opens after you already spend your discretionary budget for the month, you must decline. If some friends invite you for an impromptu ski vacation, and it is over your vacation budget – you must decline.
Sometimes it will be hard, and sometimes it may even be slightly embarrassing. But if you truly want to improve yourself, you’re going to have to commit to your financial plan. And that includes committing to it when the going gets tough as equally as when it is smooth sailing.