smart spending

Don't make grandiose New Year's resolutions

SMART, an acronym recommended by goal setting experts such as Brixey and Rego, is an easy way to remember how to make a New Year's resolution doable. It encourages you to set goals that are specific, measurable, attainable, realistic and timely, and helps block the tendency to set the bar too high.

"If you have a fairly uncomplicated life, keeping two resolutions would be quite a year," says Ken Clark, a Certified Financial Planner in Little Rock, Ark.

Once you decide on one or two personal financial resolutions, you'll need to avoid what Clark calls "hidden avoidance behavior," or not moving forward to accomplish your goal. For example, if you've decided to cut back on expenses, spending three hours a week clipping and organizing coupons will not move you toward that goal unless you use them regularly.

"You'd be much better off looking at how and where you've been spending instead," says Clark, who wrote "The Complete Idiot's Guide to Getting Out of Debt," which will be released in February 2009. And then you can devise and execute a plan that trims the fat from your budget.

The same applies to those who read all the popular finance books before committing to their first move to reduce their debt. Becoming an expert on cost cutting but not doing it is a formula for failure, Clark says.

2. Sealing the deal 

For lasting change to occur, Brad Klontz, a clinical psychologist and co-author of "Wired for Wealth," says you must believe the change is important, feel confident you can do it and be mentally ready to make the change.

Here are three ways to approach a New Year's resolution successfully:

  • Believe that the change is important to make.
  • Feel confident that you have the ability to make the change happen.
  • Be mentally, physically and emotionally ready to make the change.

But how will you know when you're completely ready for change?

"When it has become a top priority for you to do so, and you recognize the benefits of change outweigh the costs of doing business as usual. And (when you) are motivated to take immediate action," says Klontz, who practices in Kapaa, Hawaii.

"Change can be uncomfortable and take a lot of energy. So for many, the financial stress may need to increase before (they) are properly motivated to take action," he says.

3. Seeing resolutions to completion 

To make your resolutions stick, you should write them down, says Brixey, the financial expert.

"Storing them in your head doesn't work. When you write resolutions down, state them positively and you're more apt to do them," Brixey says.

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Don't write, "I won't spend any money in 2009." Instead say: "I will create a spending plan and stick to it." Or make your resolution even more specific by saying, "I will shave $50 off my expenses each month."

Post your resolutions on the bathroom mirror, the top of your computer monitor or some other place where you'll see them often. When you're reminded daily of your promise, accomplishing the task will become second nature.

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