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A Cautiously Optimistic Approach to New Year’s Resolutions.

New year, new you. Well, the same old you with some new aspirations. Or the same aspirations from new years’ past. Meaning that something clearly isn’t working. Don’t worry, you’re hardly the only person unable to make (drastic) changes to their life. Behavioural change, real and long-lasting behavioural change is hard. So hard, that the market of self-improvement books is worth billions. So there’s that.


Are you likely to stick with your resolutions? Depends. How hardcore are they? Because if they are too extreme, it’s likely that they don’t fit your current lifestyle. And if they don’t fit your current lifestyle, they’re not likely to persist. Unless we’re throwing the entire lifestyle out the window was well (a peculiar method of behavioural change, but not, surprisingly, entirely without merit). I keep coming back to this, but if you want to change something about yourself, set a habit, reach a goal, make sure you do so in a SMART manner. SMART = Specific, Measurable, Attainable, Relevant and Timely Let’s discuss those in turn.


Specific The goal needs to be specific. Not ‘I want to be rich’, but ‘I want to have be wealthy enough to own a house’. For the former we have no benchmark, for the latter we can find one. Where do you want to live? How much do houses go for in that area? How much of a down payment do you need/want? What level of mortgage are you comfortable with? At what rate (I’ll admit, bit of a difficult question these days…)? It doesn’t have to be a money or finance based goal either (but as this is Money on the Mind, money examples first, naturally). It works for health, weight, social, skill learning etc. as well. Examples here would be: I want to be able to lift 80 kilos, I want to lose 80 kilos (might be a tad much), I want to make at least 80 new friends and I want to successfully learn 80 new baking recipes (80 is the number I’m going with, apparently).

Measurable For those who think that buying a house is near impossible (I’m with you), let’s break this down. Most goals seem impossible at large, but breaking them down helps us actually plan, and therefore measure or adherence to the goal. Now that we have a down payment figure in mind, we can figure out where that money is coming from. How much have you saved already? Are you comfortable dedicating all of that to a down payment? How much are you saving, per pay cycle, as is? Could you save more? Could you earn more to dedicate more money to the down payment? Once you’ve set yourself an actual number, meeting that number on a regular (per pay cycle, per week, per month etc.) is success. Not meeting that number is not success.

Attainable If it turns out success is more difficult to reach than you imagined (i.e. you were way too optimistic when setting this goal), we need to adjust. This is where a lot of non-SMART goals fail. The goal is unattainable. For most people, saving up for a down payment in less than a year is unattainable. Unless they make a lot of money and are happy with a ‘relatively cheap’ house. When breaking down your goal in steps 1 and 2 (Specific, Measurable), what is, and is not, attainable for you should have become clear. Let’s assume that the goal you set up initially ($xxx for down payment) seemed attainable. You could save additional money per pay cycle and have put these smaller lifestyle changes in place. But then your car breaks down, or there was a rent increase for your apartment and moving is not an option. Or, I don’t know, there’s a massive price increase in your utility bills. Now what? Well, bills need to be met. If you can (partially) ‘save’ the contributions to your goal by reducing your consumption for a bit, that’s great. But most likely, it will be at the expense of your goal. I would not recommend going into debt for this – if you can avoid it. Episodes like these can be demotivating, but they are a key part of life. Human beings are exceptionally bad at planning and properly budgeting for exceptional expenses like these. If you goal spans multiple months or years, keep in mind that these will occur with some frequency. Don’t let it discourage you. Do not focus on the money you couldn’t contribute to your down payment, focus on the money you have been able to contribute so far. Life happens, and despite it all, you have managed to contribute some. So keep it going! Relevant My most favourite subpart of SMART: relevancy. In the grand scheme of things, is the goal even relevant (or sometimes: applicable) to your life? If you are someone who never holds down a job for over a year and keep bouncing around the country, or the continent, or even the planet, does it make sense for you the own a house? Real estate investors will probably tell you that you should always invest in bricks and just rent it out, but that also comes with commitments. And if you can’t be asked to commit to such a commitment, and the idea of needing to manage something from the other side of the world makes you ill, well, than maybe this isn’t for you? Other goals which often aren’t super relevant are people who want to learn a specific kind of skill, but have absolutely no way to apply or maintain upkeep for it during their daily lives. Same goes for wanting to lose weight but not wanting to change your diet and hating all forms of exercise. I’m not saying you shouldn’t lose weight, I’m just saying that with those decisions made prior (no diet, no exercise), this goal is irrelevant. Timely Last, we turn to our old friend time. Some argue that Timely should be merged with the first two steps (Specific, Measurable) because it sets a defining criterium for both of those, which is fair. Timely means simply the time in which this goal needs to be reached. If you want to save for a down payment of $250,000 in five years, you need to save $50,000 per year and about $4,200 per month. If you cannot meet those temporal subgoals, you know you won’t manage the larger goal either. Again, this feeds into the goal being attainable.


So that’s SMART for you. Why am I so cautiously optimistic about new year’s resolutions? Well, first because most people’s goals aren’t SMART. Second, because behavioural change is hard. And third, because there’s such a thing as national quitter’s day. Most people’s resolutions don’t even make it our of January alive. Are we going to do better?


Behavioural Science

Personal Finance



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