Personal Finance

How to make your financial New Year's resolutions stick

How to stick to your New Year's resolutions
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How to stick to your New Year's resolutions

If you want your New Year's resolution to work, you face tough odds.

About 46 percent of New Year's vows will be in force six months into the year, according to widely cited research from John Norcross, a University of Scranton psychologist and author of "Changeology: 5 Steps to Realizing Your Goals and Resolutions." One in 4 resolution makers Norcross studied dropped off after the first two weeks.

It's not all gloom and doom though. "My research indicates that you are 10 times more likely to change by making a New Year's resolution compared to nonresolvers with the identical goals and comparable motivation to change," said Norcross, who wants to do more situps in 2017.

Only 4 percent of people who set similar goals, but did not make any New Year's resolutions, succeeded with their goals, Norcross' research found.

You can improve your chances of success by following these steps:

Make your resolution SMART

How to become financially fit in 2017
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How to become financially fit in 2017

SMART goals are specific, measurable, achievable, realistic and time-bound.

For instance, if you want to get out of credit card debt, you should detail how much you want to pay off in 2017 (specific), keep tabs of the balance online or on your mobile device (measurable), make sure you can do it without busting your budget (achievable and realistic) and give yourself a deadline (time-bound).

"You should be a slightly pessimistic when setting your goals," said Stephen Wendel, head of behavioral finance at investment research firm Morningstar, who has studied New Year's resolutions.

It's your rational self that makes the New Year's goals, but it's the emotional you that has to deliver on that promise. "Having SMART goals makes it harder to self-deceive," Wendel said.

Focus on one financial goal

Of course, you can pay off debt, save for retirement and your kid's education at the same time. Though if you really want to improve your financial life, you may want to concentrate your energy on one aspect of it.

That may be especially true when it comes to credit card debt. Consumers who focused their repayments on one card paid down more of their debt than those who spread out their payments across multiple accounts, according to a recent study from Boston University, Georgetown University, the University of Alberta and the University of Manitoba.

Researchers used three years of anonymous data from HelloWallet, an online financial wellness program, to study nearly 6,000 people with more than two credit cards on average.

They found that people who paid off their smallest balances first tended to have a stronger sense of progress than those who dispersed their payments across several cards. That perception motivated them to continue paying down their debts more than people who distributed their payments over multiple cards.

Create a feedback loop

Resolutions are meaningless if you don't track your progress.

Feedback on credit card debt is easy because you receive your monthly statements in the mail or online. However, when it comes to building an emergency fund, sticking to a budget or saving for retirement, your financial successes may go unnoticed if you don't keep tabs on them.

Free online personal finance services, such as Mint and Personal Capital, can help you track your saving and investing across multiple accounts and devices.

Though money can be as taboo as sex, it helps to discuss your financial goals with friends.

"Enlist other people to hold you accountable," said Cynthia Boman Thompson, a certified financial planner and director of financial and accounting services at Cinder Finance in Portland, Oregon.

If you don't feel like sharing, create your own inspiration.

"Write out a note or card to yourself about why your goals are important. Are you saving for your children's college? Are you hoping to go on an amazing vacation? Do you need a new car? Use this as motivation whenever you are tempted to stray from achieving your goals," Boman Thompson said.

Use your environment to help

If you want to exercise more, put your workout clothes next to your front door. The same goes for your money goals.

Limit exposure to high-risk situations and create reminders for your resolutions, Norcross said. Use your surroundings to trigger healthy behaviors.

For example, let's say you spend too much at the mall on your credit cards after work. "Change your route home from work to avoid the mall and remove that trigger," said Wendel, who once froze his credit cards in a block of ice in his refrigerator to keep himself from using them.

Automate as much as you can

You can put your financial life on autopilot to cruise to your New Year's resolution goal.

Banks, credit card issuers, fintech start-ups, investment companies and retirement plan providers make it easier to automate your bill paying, saving and investing. And most of these tasks can be done on your smartphone.

"Recent research, which is not definitive, demonstrates texting and notification apps have a positive impact on behavior change, probably through a combination of self-monitoring, reminders and rewards," Norcross said. "Apps may help with this, at least in the short run. In the long run, you will need a lot more than that."