From little changes big changes grow

New Year’s resolutions are tempting, but there are more effective ways to make changes, writes

WE’VE all got that friend who makes a resolution that is doomed to failure from the beginning.

Perhaps after years of inactivity, they take up running. But rather than starting small and building, they decide to run 5km every day for the rest of their life. They struggle on day one, are really stiff and sore on day two and worse on day three. It’s too hard, so they give up.

Or maybe they have been drinking too much alcohol, so they give it up altogether for a month … only to celebrate the end of that month of sobriety with a session at the pub.

Or they haven’t saved enough money lately, so decide to give up their coffee every day and all forms of retailing, which makes them miserable and eventually they just crack and it’s all over for another 365 days.

Year after year, people make resolutions – often similar to ones made in previous years – but in many cases, nothing changes.

Life is a long-term game, so why not make small, sustainable tweaks and don’t worry about getting rich quick or losing 10kg immediately. Do it gradually and be much closer to your goal by the same time next year.

Recent research has indicated that Aussies are keener than ever to save more money, yet still seem unable to change habits. Marion Mays, founder of wealth advocacy firm Thalis Stanley Group said people treat their money too much like a new year’s resolution.

“They are all-in on reducing their spending, having a savings plan and intention of investing,” Ms Mays said. “Yet only a few months later they are back to their old ways of ad hoc spending, not saving and feeling they are a long way off investing.

“Most people tend to fall into this category and do their saving once all the bills are paid. And, even when they save, tend to do the splurgespending to reward themselves, only to undo what they’ve just achieved and so the cycle goes on.”

Ms Mays said this behaviour is the reverse of what savers should aspire to.

“We need to pay ourselves first. This means putting at least 10 per cent of all your income into a savings account that is not attached to your everyday account and to not touch this ever,” she said.

Another initial step is to reduce financial leakage. There is no need to cease all takeaway coffees, bought lunches and non-essential purchases, but these should be cut out some of the time and the savings put away.

“Look at ways to invest this into assets that appreciate in value,” she said. “Property is of course a main-stake investment, but there are ample ways to invest with even small amounts, be it bonds, ETFs, currency, shares … or other assets.”

Ms Mays said long-term dedication is required to get ahead and stay there.

“All it takes is a commitment to your own financial future and the willpower to maintain this – no matter what bills or unexpected costs, or tempting purchases may come your way,” she said. “I’ve seen amazing results from people who later commented that their perception of a major drop in lifestyle never came to be.”