State College

Sticking to financial resolutions requires changes in thinking

The last champagne bubble has popped, the confetti has fallen and the ball has been dropped in more ways than one.

Sayonara, 2016. It’s been fun.

Now onto the New Year and a new slate of resolutions, most of which remain unfulfilled. Try as we might, setting a goal and sticking to it is a Sisyphean task. According to psychologists, making new habits or breaking old ones is difficult. You’re still pushing the rock up the hillside, but now it’s covered in snow.

According to research by the University of Scranton, almost half of Americans make resolutions, but about a quarter of us don’t make it past a week. In making better financial decisions, a traditionally popular pick, we don’t fare much better. A survey by the mutual fund company Fidelity Investments found that about 36 percent of Americans consider financial resolutions and about seven out of 10 think their financial prospects will be better in 2017. But, according to 2016’s results, only about half stay on track.

“This is the time when people get more serious about their finances and think ‘this year is going to be different,’ ” said Ash Toumayants, the founder of Strong Tower Associates, a State College financial planning firm. “But it’s a behavioral finance thing: We don’t expect bad things to happen, so we end up making all these plans and then something bad happens… and then that takes priority and it derails the plan.”

So step one, Toumayants says, is to create an emergency fund. He suggested saving at least three to six months worth of living expenses, even if that means sacrificing in other areas. Depending on where you are in life, that vacation or new car may have to wait.

“Instead of thinking about how you’re going to save money, think about how you’re going to spend it,” Toumayants said. “We all want nice things, we all want to do stuff with our money and enjoy ourselves, but all that enjoyment is keeping us from other longer-term goals.”

Whether it’s saving money, paying off debt or spending less, it all adds up, experts say, and sticking to it requires small changes in thinking. With time and discipline, they’ll accrue — just like your money, said Kristen Coombs, founder of Coombs Financial Advisors.

“Make it a habit,” she said. “I make it a joke: Change the batteries in your fire alarm and increase your deferral into your 401K by 1 percent.”

Besides increasing deferrals into one’s retirement plan, Coombs advised to set up automatic transfers and focus on making them a percentage versus a dollar amount. That way it shifts with your income — and you don’t end up saving less.

“Have that automatic deposit into your IRA or whatever savings vehicle you have, and then pay the rest of your bills,” she said. “Because we forget and then we spend.”

Bruce Vinion, a co-founder at VK Wealth Advisors, said making smart investments also starts with small, attainable goals.

“It’s just like building a house,” he said. “Build a good foundation, and go into it on a systematic basis.”

For investors, Vinion added, that means building a strong base of stocks and bonds. But he cautioned against relying on mere precedence.

“I think a lot of the problems for first-time investors are that they’re lured into buying last year’s best mutual fund,” he said. “They look at past performance and normally those funds don’t perform as well the next year.”

Financial planning is a bit like another resolution: getting in shape. When tackling either, experts say to focus on why you’re doing it and limiting the temptations around you.

“If someone wants to get in shape financially,” Toumayants said, “you want to focus on your core.”

Roger Van Scyoc: 814-231-4698, @rogervanscy