In a survey of New Year's resolutions, Allianz Life found that diet and exercise took the top spot, followed closely by improving money management.
Of course, the trouble with New Year's resolutions is that even though they're important to u, they're hard to keep. It's actually perplexing when you think about it: we know what we have to do (both for fitness and finances), so why is it so hard to do it?
A lot of it might come down to how you motivate yourself -- and that's good news. Once you understand how you think about your goals, it'll be easier to find the means to motivate the actions you have to take to achieve them.
That's why there are enormous industries built around both fitness and personal finance. Each guru or diet has a different method to help you achieve your goals, but -- as you probably already know -- it can be hard to find one that works for you.
Why is that? It all comes down to how versus why.
Outcome versus process
When you think about diet and exercise, do you think about a outcome-based goal (lose 10 pounds) or a process-based goal (eat better every day)?
Outcome-based goals focus on "the why" of improving your diet and exercise regimen, meaning the long-term, big picture outcome you want to achieve. On the other hand, process-based goals focus on "the how," on the daily actions needed to achieve them.
This distinction is important because it tells you what you need to focus your energy on and how to tackle the goal itself. It's also important because it tells you what you need to do to keep up your motivation.
If you're starting to see the relation to finances, you're on the right track.
There's a world of difference between "save more money" and "stop eating out" as a goal -- whichever one rings louder to you can thus inform your process for sticking with the plan and eventually achieving the goal.
Focusing on "the why"
If you're into outcome-based goals, you're thinking along the lines of a specific and achievable end. These could include things like:
- Lose 10 pounds
- Bench press 150 pounds
- Save $3,000
- Retire at 55
To reach these goals, you'll want to have a process that involves measurement (of course, some goals, like retiring at 55, will require you to set other goals, like a retirement savings account balance -- this reasoning applies to all situations along these lines).
Your process could thus include doing a "weigh-in" at the beginning of the year -- both for your body and your bank account -- and developing a plan of regular measurement and accountability. This will allow you to track your progress as you work toward your goal.
Maybe you sign up with a personal trainer, or download an app that can help you track your savings account balances.
Focusing on "the how"
Process-based goals have a bad rap in the financial press. That's probably because, even if they're measurable, they seem sort of wishy washy to an industry that tends to focus on outcomes. After all, no one cares if the mutual fund manager reviews three investment decisions each day. We care about annual performance -- outcomes.
I'd argue, however, that process-based goals are not only valid, but preferable in situations when the outcome-based goals are too big or overwhelming. That's because they focus on routine, daily actions. Simple, easy to measure, and low-key. Things like:
- Eat vegetables daily
- Go to yoga three times per week
- Spend no more than $200 on shopping per month
- Auto-debit $50 to savings every week
In this case, to stay motivated you won't be measuring performance; rather, you'll focus on tracking adherence. That implies that, in a way, these kinds of goals are more about habit formation than anything else (unless you use auto-debits, which are a freebie!).
One way to form your new habits is, again, accountability. Having someone to help you stick with the plan is usually useful. You could also put limits on yourself by using cash instead of cards to stick to limits, linking good habits habits together, or rewarding yourself for a job well done. Gretchen Rubin of The Happiness Project has an immense amount of great information about habit formation, if it's something you'd like to explore.
In both cases, the idea is to use the right kind of goal for your personality or need, and to create the right kind of support around you so that you can reach that goal -- whether it's a modest daily ritual or a big, overarching accomplishment.