Ringing in the New Year with a Financially Smart New Year’s Resolution

One of the most common themes in messages from readers in late December is the New Year’s resolution. People everywhere seem to want to use the turning of the calendar to signify a new start when it comes to their personal goals.

I can’t blame them. I do the same thing myself.

Of course, as with many people, my resolutions sometimes click and sometimes do not. They always start with the best of intentions, but sometimes they wind up completely failing.

The question is, how exactly do you improve the chances of success in a New Year’s resolution?

The reality is that a New Year’s resolution is no different than any other personal goal one sets for themselves. It just happens to be a goal in which you start making forward progress on January 1 of a given. That’s the only thing that separates it from any other goal, really.

Tools for Making a New Year’s Resolution Stick

Over the years, I’ve found a lot of techniques that work well for making goals – and thus resolutions for the new year – stick around for a while and often turn into lasting success. Here are a set of tools that you can use to make your own resolution last.

Only Choose One or Two and Make Them Your Focus

If you want to be successful at the goals you’re setting for yourself, choose a very small number of goals. The larger the number of goals you set for yourself at the same time, the harder it becomes to achieve any of them.

Why does that happen? The truth is that humans only have so much energy in a given day for active decision making, and when you’re trying to achieve a goal, you burn up some of that active decision making energy. The more goals you have, the more you burn up. When you also need some of those decisions for your everyday life and for your professional career, you run straight into decision fatigue, which is a sure recipe for failing at goals.

Decision fatigue simply means that your brain is worn out from making so many decisions, so it begins to rely more on instinct and impulse than on what’s actually the best decision for you. In effect, you have only so many tough decisions that you can make in a day without your brain just getting worn out. It’s absolutely a real thing, one that almost everyone has experienced in their own lives.

So keep your number of goals small so that you don’t run into decision fatigue. The more goals you have, the more meaningful decisions you jam into every single day and the more likely it is that you’re going to fail at a goal because of decision fatigue.

If Possible, Use Data to Figure Things Out

A few weeks ago, I wrote an article about using data to develop personal finance goals for the coming year.

That article still rings true. If you have a lot of data about your activity in the past year or two, whether through a personal finance tool or an activity tracking device or something else entirely, that set of data can definitely form the basis for a pretty smart goal.

Take the activity tracker suggestion. Let’s say you used a Fitbit for the last year and averaged, say, 6,000 steps a day. You might decide to make it your goal next year to average, say, 7,000 steps a day. Since you have the data from the past year, you know this is a sensible goal, and you also already have the tool in hand to track that data.

The point is simple: If you have lots of data, you know how you currently behave. Also, if you have lots of data, you must be doing something to record it, something that’s likely to continue. Thus, you have everything you need to set a goal for yourself in the coming year and see whether or not you achieve it.


A SMART goal is one that includes five specific elements.

Specific means that you’re clearly defining exactly what you want to achieve. You don’t simply say “I want to lose weight,” you say, “I want to lose 50 pounds by Christmas.” The more detail, the better.

Meaningful simply means that the goal has some sort of personal importance to you. You care about this goal for some reason and you want to achieve it, ideally for yourself and not for others.

Action-Oriented means that the goal leads directly to actions you can take every day to move toward this goal. A financial goal would point you toward spending less, for instance, and a weight loss goal would point you toward eating healthier and exercising.

Realistic means that you’re setting a goal that is actually possible to achieve. A 150 pound person is not going to lose 100 pounds, for example. You’re likely not going to be able to lose 100 pounds in a month. You’re not going to be able to save a million dollars in a year if you make only $60,000 a year. Your goals have to be set within the reality of your situation. Note that this does not mean your goal should be easy. In fact, an easy goal isn’t really very exciting and won’t motivate you. A good goal manages to be challenging, but doesn’t put the goal outside of what’s actually possible.

Timely simply means that you have a target date for achieving your goal. You have a deadline, so you know that you don’t have time to mess around and take days off and put it off until later. It requires action today.

A good New Year’s resolution incorporates all of those elements into a single powerful goal.

Make Success as Dependent on Your Actions as Possible

One flaw that many goals have is that they put at least some of the control over success in the hands of others or in things outside of their control. They set up big goals for themselves, like earning a promotion, only to find that the success of that goal is entirely in the hands of someone else and, no matter how much they prepare, that goal can still end in failure.

A good goal puts as much of the control over success in the hands of the goal-setter as possible. Rather than setting a goal that someone else controls, make your goal oriented around preparation for that event.

For example, if your goal is to get a promotion at work, don’t make that your actual goal. Make your goal oriented around things you need to do to prepare for that promotion so that when you’re ready to request that promotion, you’ve already achieved your goal.

Make Success Open-Ended, Too

Another effective strategy when it comes to setting goals is to make the success level for each day open-ended. Make it so that if you actually achieve that day’s goal, you’re already perfectly in a position to do more.

For example, one of my long-standing writing goals is to write 2,000 words a day. In order to write that much, I have to get myself into a groove in front of the computer and, often, when I’m in that groove, I go way over that 2,000 word threshold.

In reality, the goal’s purpose is to get me in front of a computer and get myself into a writing groove. Over the course of producing that many words, I usually do slip into the zone a little and I can produce a lot of words while in that state.

Three Common New Year’s Resolutions (Financial and Otherwise) That Meet the Above Criteria

Here are some resolutions that people often create and how applying these principles to those goals can really improve them.

Resolution #1: I Want to Lose Weight

This is a resolution that a lot of people take on, but it’s a very tough one because it’s loaded with daily decisions and when decision fatigue sets in, it’s easy to fall back on it. It’s also two-pronged, as it often suggests both eating a better diet and exercising.

The first suggestion I’d make is choose either improving your diet or exercising. You can dabble in the other one by making good choices, but put your focus on one area or the other. They have different benefits, of course, and different challenges.

Let’s assume you chose to create an exercise-oriented goal. Now, let’s run it through the SMART rubric.

Is the goal specific? Simply saying “I want to exercise” isn’t too specific. A much better approach is to adopt an exercise routine, like the Lifetime Fitness Ladder or DDP Yoga or You Are Your Own Gym or P90X. The goal is to have a specific plan in place so that you know exactly what you’re doing each day.

Is the goal meaningful? Do you actually care about this goal? Is it something you want, or is it something you’re doing for someone else? Goals you take on just to please others rarely end well. Make sure it’s you that wants to do this.

Is the goal action-oriented? If you center your goal around simply completing the steps in an exercise program, then it is definitely action-oriented.

Is the goal realistic? Again, if it’s an exercise program of some kind that’s not completely outside of your starting fitness level, then it’s realistic. It should be challenging, but it shouldn’t be impossible.

Is the goal timely? Again, if you’re following an exercise program, it is likely going to be timely. If you make it your goal to complete that 13-week program in 13 weeks, then it’s definitely timely.

Is the goal dependent primarily on your own actions and not outside forces? Again, if you’re choosing to follow an exercise program on your own, it doesn’t really depend on outside forces. It depends on you and your choices. The only things that can really stop you are within you – injury or personal choice.

Is the goal open-ended? To an extent, it is. You can always choose to exercise more in a given day. When I went through the DDP Yoga program, I often did more than the program said. I usually started the day with an extra simple “refresher” bit so that I could more easily follow along with what was happening.

In other words, instead of just saying “I want to lose weight,” the goal has turned into “I want to follow a specific exercise program (say, DDP Yoga) through to the end.” That turns a very vague goal into one that checks off every mark of a good goal.

Resolution #2: I Want to Save Money

Again, this is a really positive goal… but it’s also really vague and unspecific. Let’s try to improve it.

First of all, figure out what you want to save money for. Do you simply want to have an emergency fund? Do you want to start saving for retirement? Are you saving for a down payment? Figure out what you’re saving for so that you can actually figure out how to save.

For example, let’s say you’ve decided to save for retirement. That means you’re most likely going to be utilizing your workplace 401(k) and/or a Roth IRA for savings.

Let’s run this “saving for retirement” goal through the SMART rubric.

Is the goal specific? Simply “saving for retirement” isn’t really very specific. To make it specific, figure out what your plan is. What percentage of your income are you going to save? What account are you going to use? For example, you might decide to save 6% of your income in your work’s 401(k) to scoop up all of that employer match and then put 4% in your Roth IRA.

Is the goal meaningful? It can be hard to make “saving for retirement” meaningful, especially when you’re young. For me, I found it useful to imagine a really great retirement where I had the freedom to spend lots of time with grandchildren and do volunteer work and so on. That made saving for retirement meaningful for me.

Is the goal action-oriented? It actually meets this criteria quite well. You need to sign up for these accounts early in the year, and then once the automatic savings is in place, you need to make sure your daily financial choices account for the fact that you don’t have quite as much in your checking account as before.

Is the goal realistic? Unless you are drowning in debt, most retirement savings goals are completely realistic. They just involve cutting back on your spending a little. If you want to push it and make it more challenging, raise your percentage of saving when you sign up.

Is the goal timely? As long as you set up a sharp date for getting signed up for those retirement plans, the goal is very timely.

Is it open-ended? You can always save more. Most of the time, the only thing you need to do is make a change on a website to increase your savings percentage.

Is it dependent primarily on your own actions? Absolutely. Only you can sign up for retirement and elect to contribute money to that retirement plan. Only you can make the day-to-day choices to cut back on a few frivolous things to make it work.

So, take “I want to save money” and transform it into “I’m going to elect to contribute 6% of my salary to my 401(k) and 4% to my Roth IRA by January 15 and leave those percentages in place for at least a year.” That makes the goal much, much stronger.

Resolution #3: I Want to Get Promoted at Work

This seems like a good goal at first, but it actually has a number of flaws that make it a weak goal. Let’s improve it!

First of all, what specific promotion do you want? What is the job that you’re targeting and would like to have? Once you’ve figured that out, what exactly are the job responsibilities and requirements to fill that position?

Right there, you’ve changed the goal. “I want to be promoted to workgroup manager” is a step better, but it can get even better than that.

Is the goal specific? “I want to be promoted to manager” is at least a little specific, but it’s not as specific as it could be. “I want to become a workgroup manager by the end of this coming year” is even better. We can make it even more specific, but the other questions will help with that.

Is the goal meaningful? Why do you want to be promoted? For me, professional goals are always tied to the things I enjoy doing professionally as well as how the outcomes of that work positively affect my family. I think of all of the good outcomes in my life from the result of this goal. That makes it meaningful.

Is the goal action-oriented? The “action” in this goal comes not from going in and asking for the promotion. That’s the last step. The real action comes from making sure that you’re really nailing all of the requirements for getting that promotion. What can you do each day to move towards fulfilling those requirements.

Is the goal realistic? Could you realistically get that promotion at some point? Almost always, this kind of goal is realistic but very challenging, which makes it into a perfect goal.

Is the goal timely? Putting a deadline on this whole process brings a sense of urgency and a need to work on it every day. So, set a deadline. “I want to be promoted to workgroup manager by the end of the year” works well.

However, there’s one big flaw to this goal. It is not dependent primarily on your own actions. The success and failure of this goal is outside of your hands. It’s in the hands of your boss and of the folks who make hiring decisions. You can be perfectly qualified for a job, but they might not choose you for reasons that have nothing to do with you.

So, instead of centering your goal around getting your promotion, center it around your own actions. “I will complete all of the requirements for becoming a workgroup manager by the end of the year” is a much better goal because it puts everything on your shoulders. It puts the onus for success on you, but it also means your success isn’t linked to the arbitrary decision of someone else.

Is this goal open-ended? Sure, to an extent. You can shoot for just barely meeting the requirements if you want, but you can also shoot for executing them really well.

So, turn the goal of “I want to get promoted” into “I want to complete all of the requirements for becoming a workgroup manager by the end of the year.” It goes from being a vague and nearly useless goal into being an awesome one.

Final Thoughts

The multitude of questions about goals that I’m presenting here forces you to really look at your goals in a hard way. It’s not easy at first, but the result of spending time to build a really good goal is that you’ve really increased the likelihood of achieving the things you want to achieve in life – and your life will be better for it.

Good luck!

Trent Hamm
Trent Hamm
Founder of The Simple Dollar

Trent Hamm founded The Simple Dollar in 2006 after developing innovative financial strategies to get out of debt. Since then, he’s written three books (published by Simon & Schuster and Financial Times Press), contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.

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