Financial New Year’s Resolutions: Bah, Humbug!
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Financial New Year’s resolutions are a common phenomenon this time of year – especially for anyone who overdid their holiday spending and knows the new year is going to bring a batch of credit card bills. One of the most common financial resolutions is, “I’m going to make a budget and stick to it.”
I’ve not written much on New Year’s resolutions over my 30-plus years of authoring a finance column. Why? Because “white knuckling” any meaningful behavioral change is rarely successful. For example, I’ve gone to a gym daily for the past two decades. Every February the population swells from those who have purchased a gym membership and resolved to get in shape. By March, the attendance is back to normal.
The most important step of changing any problematic behavior, especially a financial one, is becoming willing to admit that changing the behavior is important, you are confident you can do it, and you are ready to change. Ebenezer Scrooge in A Christmas Carol ticked those boxes and underwent a financial and emotional transformation after he heeded a warning from the ghost of Jacob Marley and received the guidance from the three Spirits that followed.
Often, when we don’t yet believe that change is important or are ready to change, we’re in some degree of denial. Looking clearly at the situation requires courage to reflect on the past, revisiting the events in our lives where the unconscious beliefs keeping us stuck were formed.
Scrooge resisted this step and tried his best to skip over it. We often do the same. Bringing objectivity and understanding to entrenched financial delusions isn’t easy. Many people want to focus instead on obtaining more information on how to save, invest, or spend wisely. We try to jump into the present and force ourselves to change without visiting the past.