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Deep Six Your Money Resolutions

Motivated to organize your filing cabinet? Spend more time with the kids? Improve your finances? Increase your core strength? Hmmm ... it must be January.

Resolutions are great ... until the resolve melts away around the 13th of the month (or for some of us, the third). Then they simply become a list of broken promises cluttering the front of your fridge.

Make a promise you can keep
This year, instead of composing a list of New Year's resolutions, try something completely different: Make a list of New Year's habits. Habits ingrain themselves into your daily routine. Once formed, they require practically no extra effort to follow. Plus, habits are inherently harder to break.

In fact, let's make things even simpler: How about instituting just one new money habit for '07? My suggestion is this: Save money every day.

How to form a good habit
Save money every day. No problem, right? Sure, you can vow to eat out less frequently, shop around for the best price on gas, and cut the kids' allowance. But a more potent approach to cutting costs is to bring mindfulness to your everyday spending.

How many times have you gotten your credit card bill or bank statement and wondered exactly what it was that you got for $39 at Acme Mart or where that $100 ATM withdrawal went?

Wonder no more. If you vow to save money every day, you'll likely make smarter decisions with every dollar that passes through your hands. Here's how:

Make more conscious cash decisions. Credit cards are a major cause of overspending. When we whip out the plastic, our mind goes numb; we don't process the transaction in the same visceral way we do when we spend cash. (Think of it like using poker chips in Vegas -- only without Wayne Newton tunes in the background.) In fact, some experts say people spend 15% to 30% more when using credit instead of cash.

Spending actual cash forces you to think about every dollar you spend, so you experience a physical reaction to forking over ones and fives.

Try this trick to get in tune with your spending: Institute the "envelope" approach to budgeting for a few weeks, whereby you carry around just the amount of cash you want to devote to various spending categories (lunch, entertainment, cute shoes) for that week. See how it affects your purchasing. Chances are it'll keep you from frittering away your money so much so that you'll tell the whole family to play along.

Keep the bigger picture in constant view. How much joy does a stale turkey sandwich from the corner deli add to your life? What about that gossipy magazine you tossed into your grocery cart while waiting in the checkout line? How much closer do those purchases get you to that two-week cruise or covering Junior's college costs?

Think of every financial decision in the context of your larger life goals, be it getting a new briefcase, paying cash for your next car, or securing your retirement. No, that doesn't mean sacrificing all short-term pleasures (love those gingerbread lattes, by the way). But combined with the budgeting method above, this is a pretty powerful motivator to keep the mindless spending in check.

Write a list of your big money goals on a small index card and keep it in your wallet. This constant visual reminder of what you really want to do with your money will make you think before you buy anything that doesn't align with your real wishes.

Always shop with a list. Studies show that as much as 60% of supermarket purchases are unplanned. With the average family shelling out $5,000 for groceries each year, that's $2,000 of unnecessary stuff running across the scanner.

It may be cliche, but shopping with a list will keep you honest. Lists (and that "envelope" budgeting method, again) are great for big-ticket retail excursions, too, like holiday shopping and "Skip Work to Go to the Outlet Mall Day" (y'all celebrate that one too, right?).

Try out a few of these money practices over the next month. You might be surprised how quickly they become habit -- and how much more attractive your finances look when it's time to ring in 2008.

Happy habit trails
For $450 in easy money-saving/money-making ideas every month, check out Motley Fool Green Light (here's your first cost-cutting tip -- try it for free for 30 days).

Dayana Yochim prefers to think of her habits as "charming quirks." In 2007 she plans to eat more leafy greens while watching less TV. She spends her time as the advisor of the Motley Fool Green Light newsletter service, which helps people replace bad money habits with more lucrative ones. The Fool has a disclosure policy.


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