The time has come where many (including myself) will be making New Year’s Resolutions. But how many people actually attain the goals they set out to complete each year? According to Stephen Shapiro, author of Goal-Free Living, one in four people who make New Year’s Resolutions never succeed. Perhaps this is because people are lacking the stamina they need to obtain their resolution, which is suggested in a study from the Clinical Journal of Psychology that found that only 46% of Americans who make New Year’s Resolutions make it past the six month mark. Or perhaps the goal just seems unattainable and overwhelming, and some people simply do not know where to start.

So how can you set goals without feeling overwhelmed and without giving up mid-year? Take baby steps. By taking several baby steps throughout the year, you will lead yourself towards your goal. When mid-year creeps up on you, you can give yourself a checkup and see how far you have come since 2009 on reaching your goal. If you have taken baby steps all along, or even just a few, then the work you have done should provide great motivation to take the next steps needed in the latter six months of the year.

Roughly 1/3 of resolutions are financial ones and I suspect that this year, that percentage will be even higher. Below is a list of common financial resolutions, and the baby steps that you can take starting on January 2nd.

Resolve to Get Out of Debt

Is this year the year that you are finally going to tackle that debt of yours? If doing so turns your stomach or feels overwhelming, you can break this resolution down into multiple baby steps.

  1. Choose a method to pay off your debts; Suze Orman suggests paying off high-interest debt first, while Dave Ramsey’s method is to start with the smallest debt and work your way up.
  2. Go over your budget, and decide how much money you can allocate to paying down debt each month. Multiply this out by 12 months, and see how much debt you can have paid off by December 31 for extra motivation.
  3. Write your first check, or set up your first automatic withdrawal above the minimum payment required. Repeat for each month to come.
  4. During your mid-year check-up, see if you can allocate more money to debt payment. This could come from a raise, income tax return, etc.

Resolve to Save up for Large Yearly Expenses

This is one of my personal New Year’s Resolutions for this year. Every six months, I know that the insurance is due on one of our vehicles…yet I allow it to creep up on me so that I have to scramble for the money twice a year. This year I am doing it differently and will be saving myself a few headaches. For you, the bill could be taxes, association fees, childcare fees, etc.

  1. Open up a savings account using ING DIRECT, or other online bank account, and give it purpose by naming it (for example, I will be naming mine “car insurance”).
  2. Sit down and calculate what your large expense is likely to be. In our case, it is $544 every six months. Divide this number by the amount of months, or paychecks, you have until it is due.
  3. Set up an automatic withdrawal each month, bi-monthly, weekly, etc. so that when the bill is due, your money will be waiting for you. Our automatic withdrawal will be for $90 each month.

Resolve to Increase Monthly Cash Flow

Perhaps you have been feeling pinched over the last year, and would like to increase your monthly cash flow for this year. Here are a few ideas of how to do this in order to get you started.

  1. Pay off your debts (see the first resolution for baby steps). This will not only free up the money you were paying towards that debt, but it will also knock out the interest payments you are making to hold that debt each month. Paul and I will be paying off his car loan in seven months from now. We are currently paying $50 in interest on his car loan each month. By making a large payment on his car loan in the beginning of the year, that will decrease the amount of the loan going towards interest, and our debt will be paid down even faster, thus increasing our monthly cash flow more quickly.
  2. If you normally get a tax return at the end of the year, work with your Human Resource Department to decrease your tax withholdings each month. While you won’t have a large sum of money to look forward to come next April, you will increase your monthly cash flow now.
  3. Carpool with a co-worker, or use craigslist/bulletin board/email/etc. to find a person to carpool with. Split the cost of gas, which will automatically give you extra cash each month.
  4. Earn between $100-$3,200 extra per month by wrapping your car in an advertisement. You can think of yourself as a Nascar driver being sponsored to go to work and pick up the kids at their activities!

Resolve to Consistently Donate to Your Future Self

This is the year—not next year, not the year after—when you need to open a retirement account (if you do not all ready have one) and consistently deposit money into it. I had the distinct pleasure of seeing Suze Orman live a few weeks ago, and she had something very thought-provoking to say about people who complain to her that they do not have any money to save for retirement right now: If you can’t pay all of your bills now, then how are you supposed to pay your bills without a paycheck?

  1. Sit down, and have some fun with a retirement calculator. Try out a few different scenarios, and see how much your money can be worth in 10, 20, 30, 40+ years when you retire. This should help to motivate you for the next steps.
  2. Figure out how much you can allocate each month for your retirement savings. Multiply this number by 12 to see where it will get you by the end of the year, and adjust as necessary.
  3. Visit,, or another firm, and open up a target retirement account. This account will automatically allocate your portfolio according to your age, meaning that if you are young and have many years before retiring, more of your portfolio will be invested in stocks. As you age, your portfolio will age with you and grow more conservative.
  4. After opening the account, deposit each month by linking a bank account to your new retirement savings account and setting up automatic withdrawals as if you are paying a bill.
  5. During your mid-year check-up, see if you can allocate more money to retirement. This could come from a raise, paying down debt, increased monthly cash flow, etc. Remember that there are limits to the amount that you can contribute each year.

Resolve to Pay Cash for Everything

Credit cards have wonderful perks for disciplined users, and I personally like to take advantage of this. However, it looks like many credit cards are now going to charge an annual fee to their best customers: the ones who pay off their balance each month and only use the credit card for the rewards. Perhaps it is time for some of us to switch our financial systems over to cash, or for people who use credit cards without as much discipline to switch to cash all together.

If you are living on credit cards now (even with discipline), this means that you are charging this month’s living expenses to next month’s tab. Essentially this means that if you quit cold turkey, then you will have to pay cash for everything in the month you are in, as well as pay off last month’s living expenses. In order to do this, you will need to either pay off last month’s credit card debt/living expenses with your savings, or slowly make the transition to paying with cash so that you do not need to touch your savings at all. I prefer the slow transition, and here’s how you can make it.

  1. First of all, you will need to cut your spending on your credit card this month so that after you pay your credit card bill next month, you will be left with some cash in your checking account to pay some of that month’s bills (instead of charging them like you normally do). For example, if you normally budget $250 per month for groceries, eat more food from your freezer and cupboards this month in order to charge just $200. This will free up $50 for next month to use to pay a bill that you normally would charge to your credit card.
  2. Decide which bill you can use this extra $50 to pay in cash, check, or automatic debit from your checking account. Call the service provider in order to set up the new payment type, and to cut off your credit card from the account. You have now successfully transitioned one of your bills to cash each month.
  3. The following month, cut your budget from another category, or from the same one again, in order to free up some more money. Perhaps this month you can cut your cable bill and use that money to pay a bill in cash the following month. At that point, you will be paying two bills in cash. This method can take you 6-8 months to transition all of your bills over to cash, and you may still need to take some money out of savings for a bill or two in order to disengage your finances from your credit card cycle.
  4. Another way to achieve this is to use an income tax return, bonus, or other lump sum of money to pay all of your bills for one month (depending on the amount), and get your finances off of your credit card cycle and into a cash-paying cycle.

Let this year be the year that you can look back on with pride for your achievements.

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Comments to New Year’s Financial Resolutions: Resolve to Take Baby Steps

  1. ” However, it looks like many credit cards are now going to charge an annual fee to their best customers: the ones who pay off their balance each month and only use the credit card for the rewards. ”
    No sign of this happening yet… If it does, it’ll be the question of math (for disciplined users): annual fee vs rewards amounts vs convenience.

    “If you are living on credit cards now (even with discipline), this means that you are charging this month’s living expenses to next month’s tab.”
    This is true only in part. Yet, you pay this month’ expenses next month, but if you are disciplined you also have extra money left this month. If you are like me, you move this money to savings now an pay your CC bill from next check. So the alternative, if you switch to cash would be simply to 1) wait with moving money from checking to savings/investments or 2) move money from savings to checking. Both are less convenient and result in possible loss of interest or investment opportunity. So if or when the cards would start charging yearly fee, it’d be the matter of figuring out if it’s worth it.


  2. Hello Kitty!

    Thank you for your comment. It could certainly still be worth paying the potential annual fees (my credit card has not started this yet either…but I am holding my breath) if the rewards are great. For example, I have cashed in my rewards for over $400 worth of gift cards this year, so if there had been a $35 annual fee attached to the card, it still would have made financial sense to keep the card.

    I hope your holiday was wonderful!

    Amanda L. Grossman

  3. Thanks for the motivation to go ‘cold turkey’ with the cc. I like the idea of weaning oneself from credit, too, but it still seems a little too attractive to overspend; I’m going all cash and will pull $ from savings if necessary.

    I also started using YNAB (so far I am loving it!) so that I will know exactly how far I can get with cash each month.

    Great post!!!


  4. Hello Holly!

    Thanks for the comment, and good luck on the cold turkey!

    Amanda L. Grossman

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