New Year’s is good for making life decisions, especially decisions revolving around your bank account. But make sure your resolutions are good ones. Millennials, the decisions you make now will follow you for years, quite possibly the rest of your life. Keep yourself and your financials secure by setting specific, prudent, and cost-efficient goals for yourself and following through with them.
And stay away from the wishy-washy goals that sound good until you actually try them. Some are sneaky in that they appear to be beneficial but have hidden flaws. This article provides 7 faulty financial resolutions you should steer clear of today and for years to come.
1. “This year, I’ll start saving up more money.”
Nothing would be wrong with this one if people actually did it when they resolved to. The problem with saying this is that it fails to set a specific plan or amount. Starting out with such a vague, faulty financial resolution ends in frustration when you have no idea where you’re going with it.
Instead, think about what “saving more” means. Which areas will you target? Car? Living expenses? Go through and research each of them to set an educated minimum for how much you should save. Better yet, whittle these areas down to one and just focus on that—you’re likelier to succeed by picking smaller goals that aren’t overwhelming. Know your needs and set realistic goals—short term and long term—that work within your limitations.
Specific Financial Plan for Buying a Car
Take a look at a sample pricing scenario to determine your budget and see what a car purchase would look like for you. Some things to take into account are:
- Down payment (20% of price)
- Monthly payments (for 5 years)
- Sales tax (varies)
- Interest rate (varies)
2. “I’m going to focus on paying down debt.”
Just like number 1, this one looks good. But think bigger. Look at putting your money in an interest account and/or starting an retirement account. Both of these can help you out in the long run. The down debt isn’t going anywhere, so why not focus on more lucrative savings strategies and tackle the down debt after you’ve set up a secure financial situation for yourself?
In fact, financial experts specifically recommend avoiding this faulty financial resolution because certain investments can offer more than loan interest rates. Devise some savings goals for yourself before you move on to the loans.
If your savings goals are in place, you can feasibly try paying $50 or $100 more a month on your loans at this point.
3. “I’m going to wean myself off my credit cards.”
Using credit cards less can be good for you, but total discontinuation is not a good option. By following this faulty financial resolution, you are setting yourself up to rely solely on a debit card. Do this, and your money is less safe. And it doesn’t do wonders for FICO scores since it doesn’t keep credit current. A credit score-friendly alternative is to use your credit less often and buy less expensive things.
4. “I’m getting a gym membership.”
Getting more fit is a good goal—but watch out for the expenses. Gym memberships and healthy food (looking at you, Whole Foods) can get pricey, and only a faulty financial resolution supports unchecked spending. Fortunately there is a multitude of ways to eat better and get more exercise without breaking bank. Be conscious about the effect your health goals may have on your savings goals and ensure that each doesn’t interfere with the other.
Try hiking or jogging for cheap exercise alternatives, or check out free fitness classes (they’re more common than you think!) Before splurging on a gym membership, take a look at any deals on coupon websites for more wallet-friendly options.
As for food, support local. Save those supermarket coupons and start going to farmers markets. You’ll be saving money and giving back to the community at the same time.
Savings-Friendly Exercise Options (Completely Free!)
- Stairs workout
- Walk in the park
- Habitat for Humanity work
- Community tennis court
- Library workout videos
5. “I’m going back to school.”
Think before you leap. A graduate degree can be beneficial depending on your field, but do your research and make sure it’ll be beneficial to you before making your decision.
Also keep in mind you have to take the GRE, which costs $195, and prep course prices can climb into the thousands. That’s something you’ll have to worry about before even before student debt.
Be positive that an extra degree will get you a better-paying job. Be prepared to deal with student debt later on down the road, and make sure the debt will be worth it.
6. “I’m going to buy a new house/car.”
Maybe you’re fresh out of school with a brand new decent-paying job, but extra expenditures of this magnitude should wait. 20- to 30-year-olds with faulty financial resolutions like this end up waddling in debt, so count yourself out.
Instead focus on building your credit history, which will be invaluable when you’re looking at mortgage and/or auto loans. If you would like to buy a house or car, start checking out down and monthly payments and build up your savings account in preparation.
[Read: How To Stop Unnecessary Spending]
7. “I’m quitting my job and starting over.”
Nobody should be miserable at his or her job, but thinking strategically is a must for career changes. Don’t act rashly. Think carefully about what you want to do instead, research the job market and income range, and start networking and reaching out to people who can help you make the switch. Start brushing up on relevant skills and get experience when and where you can to bulk up that resume. Turn a faulty financial resolution into a fruitful one and find job security in an area that makes you happy.