New Year’s Resolutions

Sure Christmas is coming up in 22 days, and we’re probably all a bit focused on everything that has to do with Christmas. But, you do realize, that just seven days after Christmas you’ll have 2006 staring you (blankly?) in the face.

What will you do with it?

I love to exercise. I don’t love running (although I do it), and I don’t love the elliptical machine – as a matter of fact, I really don’t enjoy cardio work that much unless it involves some type of competitive sport. But weight lifting? This I love. I won’t go into all the reasons I enjoy lifting, but I would like to make a point with it – and hopefully tie it into New Year’s Resolutions, goals, and budgeting somehow.

On the first Monday morning of January of 2006 I’m going to walk into the gym. It’ll probably be about 5:15 or 5:30 am. It’ll be cold outside. I will have probably needed to scrape the car’s windshield. I’ll walk in wearing gloves, a stocking cap, a sweatshirt with the hood on, etc. – all in an effort to stay warm during the three minute drive to the gym.

And I’ll be shocked at what I see. Instead of the usual four people, there will be twenty.

Next Monday there will be 16 people.

Next Monday there will be 10 people.

Next Monday there will be 8 people.

Next Monday there will be 5 people. One person made the cut. We’re now 4 + 1.

It happened last year. And I expect it to happen again this year too.

It’s the age-old story with New Year’s resolutions. You start 2006 with fire to your feet, a skip to your step, a whistle to your work – and the fire dies, the old step returns, and the whistle fades. Too fast!

The secret to being one of the four at the gym is to decide where you want to be in a year. What do you want to accomplish during the year? Write it down, then break it up. Let’s move away from the exercise example and get into a hypothetical with personal finances. How should you plan your 2006 assault?

Long-Term Goal – 12/31/2006 Increase net worth by $18,000

So, on June 30 of 2006, where do you want to be?

Mid-Term Goal – 6/30/2006 Increase net worth by $9,000

That would necessitate yet another step…

Short-Term Goal – 3/31/2006 Increase net worth by $4,500

And the pattern continues…

Mini Goal – 1/31/2006 Increase net worth by $1,500

And now we get to the meat of the matter. What will you do next month, in January, to meet this goal? These are your micro goals – and they’re crucial to your Long-term goals. They’re truly where the rubber meets the road!

Micro Goals from 1/1 to 1/31/06 to increase my net worth by $1,500

I will:

• Contribute 6% of my salary ($250) to my 401(k) for the company match ($125): $375
• Invest 9% more of my salary to max out my Roth IRA: $375
• Work four hours of overtime each week: $576
• Reduce my phone bill to just the necessities and actively save the difference: $40
• Start bringing my lunch to work and actively save the difference: $80
• Sell the set of golf clubs I never use: $160

Estimated net worth increase during January 2006: $1606

And on January 30th, instead of sitting down after work (where you put in two hours of overtime) in front of the TV to “relax”, you’re going to be proactive (to use a term of Stephen Covey) and assess your goals. Did you reach them? Yes – by how much? No – by how much? How will February need to be any different? How will you reach your February goal of another $1,500 dollars? And you begin to create your micro goals for February. Some will be the same, some will be different. The phone and brown-bag savings are now on auto-pilot because you have ING or some other online bank withdrawing that incremental savings monthly. You’re used to taking your lunch to work now, but you’ll write that down again anyway – as that’s still a savings. The 401(k) is done through your paycheck – along with the match. Your other 9% may also be on auto-pilot by any number of mutual fund/brokerage houses.

Are you still going to work overtime? Then write it down. How will you come up with the other $50 to get to $1,500 this month? Perhaps you could eat out once or twice less. Maybe you need to cancel the lawn service. Maybe you should eek out two more hours of overtime during the month. Is it time to hold a garage sale?

This is how the process should work. The key is to break your long-term-extremely-far-into-the-future-you- have-plenty-of-time-to-get-it-done-goal into smaller, bite size pieces. Then you take it even further and write down an action plan for each month (each week if necessary) to ensure that you take the appropriate-sized bite. You write down your goals in a memorable place (fridge, bathroom mirror, dresser, etc.) and remind yourself of them often.

This is the key for those four people that come to the gym day in and day out. They set long-term goals. They break them down. They decide on their micro goals (their action plan) and they execute on those each day. At the end of the month they turn around, evaluate the month and – with that knowledge – turn and face the new month, set their goals, and execute.