How to keep your 2021 money resolutions

Get the year off to a good start by doing more than just making promises to yourself.

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Key takeaways

  • Many people suffered a financial setback of some kind in 2020, so they want to start 2021 off on the right foot.
  • To spend less, find ways to stick to your quarantine spending habits even if you are set free to return to normal life in 2021.
  • To save more, consistency and comradery can help you stay on track for your goals.
  • To manage your finances smarter, look for ways to automate and to set aside extra income before you spend it.

Things were so bad in 2020 for most of us that it’s hard not to be optimistic that 2021 will be better.

According to Fidelity’s annual New Year’s resolutions study,* some two-thirds of Americans have high hopes for emerging from survival mode and are planning to get into better financial shape in the new year by setting some money goals. There’s a lot of ground to make up for, as the same ratio of those surveyed say that they had some sort of financial setback in the previous year, like loss of income or an emergency expense.

Will this year actually be different, though? Americans tend to make the same financial resolutions over and over, and Fidelity’s research shows that only about half are able to stay on track through the year.

“People want instant gratification, but regular practice is what strengthens your ability. It’s a muscle you have to build, the same as you do with exercise. It will get easier over time,” says Andy Reed, PhD, Fidelity's vice president for behavioral economics.

We all know that to lose weight you need to eat less, exercise more, and sleep better; for money health, you need to spend less, save more, and make smarter decisions as you go.

But how? That’s the hard part. Here are some keys to changing your behavior in the coming year to make those resolutions stick.

Spend less

One hidden silver lining to COVID-19 quarantines is that most people have reduced their spending because they are confined at home. Fidelity’s survey found that 71% of Americans feel that they were better off in 2020, largely because of saving more and spending less. That can carry over to 2021 even if we are all set free to return to our normal lives.

No matter when he goes back to work in an office, Glover Kebe, vice president, regional coaching consultant with Fidelity, is planning on sticking with the no-iron shirts he’s become addicted to and making his own coffee, which should cut his dry cleaning bill and his snack bill forevermore.

“Had it just been a couple of months of quarantine, it might not have been enough for a new spending habit to kick in, but now we’ve all seen it add up,” says Kebe, who is based in the Washington, DC, area.

You might not believe that a few bucks here or there will make a big difference, but Kebe says, “Think about it—your mortgage is fixed. Your health spending is necessary. It’s discretionary spending that sends retirement savings off the rails.”

But one important tip to making your quarantine habits be your new normal: Don’t forget to treat yourself sometimes.

“We’re not robots. We can’t hold out forever,” says Reed. “If you go with complete self-deprivation, when you break, you’ll break much harder.”

Save more

Saying you want to save more is not enough of a goal. Establishing a solid financial plan involves understanding your current state and regularly and accurately tracking behaviors and outcomes over time. Most of all, you need to be concrete. How much do you want to save? Put it in a dollar amount, not some nebulous percentage you’ll never be able to calculate.

“People develop these abstract squishy goals, but the most effective resolutions are concrete,” says Reed.

Then you just have to be really patient. You can’t go from being broke to being a 401(k) millionaire in a few months. Even if you max out your contributions, it still takes a couple of decades to get there.

Glover Kebe worked with a man who kept giving up. He was a physician who had been saddled with student debt early in his career and didn’t have anything to put aside until deep into his career. He’d start saving and get frustrated because market volatility would wipe out his gains from time to time, and he never saw his balance grow to any amount he considered significant. But he eventually committed to putting aside a specific amount each month, and just kept doing it regardless of the outcome. By the time he was set to retire, he had earned enough to retire comfortably.

“He just had to hear it enough times to continue on,” says Kebe.

A cheerleader or a buddy can help you to keep motivated in this way. “Some of it’s just faith, but some of it is not going at it alone,” says Reed. “As individuals we don’t have great will power. It’s tough to stay positive. Recruiting trusted colleagues to be cheerleaders can help. You can even turn it into a challenge or a game.”

Do it smarter

Want some good financial news for 2021? It’s a year with 53 Fridays, which means if you are paid biweekly and typically get 26 paychecks, you might get 27 in 2021, depending on your company’s policy.

You can use this pay schedule to trick yourself into saving by budgeting your essential expenses around 2 paychecks per month and diverting any other income into savings or specific buckets for extras.

This is how Miguel Turcios, a regional consultant for Fidelity based in Houston, does it. “My budget is monthly around 2 checks and those extra ones are my vacation fund. That is how I know I will be able to get away,” says Turcios.

Another key way to boost your own willpower is to automate—just get some of these tasks off your list altogether. Consider setting up your retirement contributions to auto-escalate every year, or divert a set amount from your paycheck into a savings account you use as an emergency fund.

Need another boost? Set a reminder to yourself on your calendar. You can do this on a sticky note, a phone calendar, an in-home hub device, or, perhaps most powerfully, a voice reminder of some sort.

On Andy Reed’s own to-do list for 2021: setting up automatic monthly contributions to his child’s 529 educational savings account. “I usually make contributions once a year, but forgot one year, and I felt awful,” says Reed.

Most of all, don’t forget to celebrate your wins. Reed compares it to putting on your winter coat for the first time in the season and finding $5 in the pocket. “It feels like money from heaven, like out of nowhere,” he says. “You’re going to be really grateful to your past self.”

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