3 ways to succeed at New Year's resolutions

Setting goals and sticking to a plan can help set the tone for a successful year.

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Key takeaways

  • Resolve to improve your finances in 2018 by setting a manageable number of goals and committing to a plan to achieve them.
  • Stick to your resolution by tracking your progress throughout the year.

Taking control of your finances is a great feeling. Setting resolutions at the beginning of a new year can help you reach short and long-term goals and even improve the way you feel.

Of course, making plans is easy—seeing them through can be more difficult. Not to worry, though. There are some secrets to resolution success, according to the ninth annual New Year Financial Resolutions Study from Fidelity Investments.1

People who say they successfully stuck to their resolutions last year seemed to have some things in common. Here are the top 3 tips for success from the survey.

Success breeds success. Feeling encouraged by their progress helped people to stick with their plan.

Tracking progress is crucial. When people could see the bottom line impact of their actions, they felt motivated to keep going.

Breaking down big goals into more attainable milestones works. Lofty goals are important, but you may need some validation along the way. Whether it's paying down debt or saving money, identify some key markers along the journey. Once you hit the milestone, consider rewarding yourself for a job well-done.

Top 3 financial resolutions for 2018

Ready to put the tips into action? These are the top 3 financial resolutions people are tackling in 2018.

1. Save more

55% of people said that saving more was their top financial priority in 2018. If this is one of your resolutions, here's one way to save more money in 2018:

Make savings automatic. One reason that workplace retirement accounts are often successful is because savings happen automatically. The money is put into your retirement account before you ever see it. You can recreate that on your own by setting up a recurring transfer to take money out of your checking account and whisk it into a savings account before you have a chance to spend it.

If you have a high-deductible health plan that includes a heath savings account (HSA), try to remember to contribute as much as you can to take advantage of the HSA's triple tax benefits2 and save for health care in retirement.

Read Viewpoints on Fidelity.com: Quick-start guide to your 401(k)

Consider setting a savings goal and break it into manageable pieces. For instance, if you'd like to save $5,000, start by saving $100 this week. If you can put away about $415 each month, you'll hit $5,000 by the end of 2018.

2. Pay down high-interest debt

25% of people said that this was their top financial priority in 2018—down from 28% in 2016. Here are a few strategies for paying down high-interest debt.

Track your progress. Consider using a debt payoff calculator (like this one) to see what it will take to pay off your debt. It can be a little painful to work through it slowly, but it's satisfying to check off each payment and watch your debt levels fall.

You could also consider using the avalanche method or snowball method for paying down debt if you have more than one loan or credit card you're paying off.

  1. Snowball: Pay off the lowest balance first
    Making extra payments on the smallest loan and paying it off can give you a psychological boost early on. Then apply the payment amount of that loan to the loan with the next-lowest balance. With an even higher extra payment, you begin to pay that one off quickly as well.
  2. Avalanche: Pay the highest interest rate first
    The avalanche approach is the most financially efficient because the extra payment goes to the loan with the highest interest rate. For example, consider a $10,000 credit card balance with an annual percentage rate of 16% and minimum required payment of $234.

    Paying only the minimum will cost you nearly $5,000 in interest and will take 5 years and 4 months to pay off. If you're able to pay $300 per month on that debt, you can pay it off in 3 years and 9 months, paying about $3,300 in interest—saving almost $2,700 in interest compared to paying the minimum amount each month.3 Once you've paid off the debt with the highest rate, move on to the loan with the next-highest interest rate.

Be sure to reward yourself for progress. Once you hit a milestone, treat yourself to a reward. A little positive reinforcement above and beyond the reward of getting out of debt could help you stick to your resolution.

Of course, paying off debt is a huge incentive in itself. A recent study by Fidelity on life events and financial wellbeing found that paying off debt is one of the most effective ways to boost your overall sense of wellness. While it's no fun to forgo spending and saving today to pay off debt, it may make you happier and certainly can improve your financial picture in the long run.

3. Spend less

18% of people said that this was their top financial priority in 2018—up slightly from 16% in 2016.

How to manage your spending this year:

Consider using the envelope method for budgeting and day-to-day spending if you find you need a little extra help. Determine how much you can spend in certain spending categories like groceries, fun, and transportation over a set period of time. Many people get paid every 2 weeks, so it can make sense to use that as the time frame. Each spending category gets an envelope. Into the envelope goes your spending money for that category, for the entire 2 weeks. For example, once your fun envelope runs dry, then no more eating out until the next infusion of cash comes in.

Studies have shown that people tend to spend cash a bit more carefully than they spend using credit or debit. Many people find it helpful to physically see the amount of money they have available and adjust their spending accordingly.4,5

But it's not always realistic to keep so much cash around—it is the 21st century and people are increasingly using alternative forms of payment. If cash won't work for you, track your spending using an app—or try it the old-fashioned way with a spreadsheet, or go even more old-school with a pencil and paper.

Read Viewpoints on Fidelity.com: 50/15/5: a saving and spending rule of thumb

Be sure to keep an eye on your bottom line and note the money you're able to save. If you tend to rely on credit cards to spend when your cash runs out, hide the plastic. Eventually, you may not even notice the weeks and months you didn't pull it out to cover routine purchases. Your best bet when using credit cards is to pay them off in full each month or only use them for an emergency.

It's easy to delay making decisions about important financial matters, but it feels great to accomplish your goals. The keys to success are tracking your progress and setting milestones along the way to the finish line. Simply taking the steps toward your goals and keeping at it is often success in itself.

Next steps to consider

Contribute to your Fidelity IRA now.

Explore how to invest your money and get investing ideas to match your goals.

Get your Fidelity Retirement ScoreSM—a credit score for retirement.

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1. This study presents the findings of a telephone survey conducted among 2 national probability samples, consisting of 2,015 adults, 18 years of age and older. Interviewing for this CARAVAN® Survey was completed in October 2017 by ORC International, which is not affiliated with Fidelity Investments. The results of this survey may not be representative of all adults meeting the same criteria as those surveyed for this study.
2. With respect to federal taxation only. Contributions, investment earnings, and distributions may or may not be subject to state taxation.
3. Credit card payoff calculator, Credit.com, Inc.
4. Does It Matter Whether You Pay with Cash or a Credit Card?, Psychologytoday.com, July 11, 2016.
5. Consumer insights on managing spending (PDF), Consumer Financial Protection Bureau, February 2017.

Investing involves risk, including risk of loss.

Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.
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