A financial planner outlines 4 New Year’s resolutions about money that never work, and how to set more realistic goals instead

• Instead of making vague new years resolutions, break down large financial goals into specific actions.
• if you haven’t already, saving at least a month’s worth of emergency savings is more important than rushing to pay off your debt.
• Before January 1, take time to review your 2021 personal or family financial wellness.
• Read more stories from Personal Finance Insider.

The holidays are already emotionally loaded, with complicated family reunions and fraught travel plans. On top of that, the emotional aftermath of Black Friday and Cyber Monday comes through with a vengeance.

One minute, you might feel like a badass for finding the best sales on the internet, and the next you might feel guilty for spending too much or splurging on something luxurious. Holiday spending emotions can lead to making unrealistic financial New Year’s resolutions.

Financial planner Mamie Wheaton of LearnLux shares four common financial New Year’s resolutions about money that never work, and what to do instead.

Mistake 1: Swear you pay down all your debt this year

Instead: Build an emergency fund first

“You really have to ask yourself why you want to pay down that debt,” says Wheaton. “Sometimes, it’s emotional. People get attached to becoming debt-free.”

Wheaton says that before you focus all your energy on paying off debt, it’s more urgent to secure at least one month worth of emergency savings. An emergency savings fund can help you and your family survive financial hardship while keeping you from accruing even more debt.

Wheaton suggests keeping your emergency savings in a high-yield savings account that you can easily access during emergencies. One month is the bare minimum, but experts generally recommend aiming to save at least three months worth of living expenses.

If you already have an emergency fund, take a closer look at the interest rates on your debts. “Any debt with interest rates above 4%, like credit card debt, should be prioritized,” says Wheaton, “but otherwise, your money might be used better in other areas such as investments or retirement.”

The average 10-year stock market return is about 9%, which means your investments could grow significantly faster than your debt over time. While debts with high interest rates can easily snowball, it’s more feasible to take your time paying off debts with sub-4% rates and let your money grow elsewhere instead.

Mistake 2: Vague financial resolutions 

Instead: Make a specific game plan

Break down a large goal into bite-sized microgoals with shorter deadlines and six-month milestones to track your progress, Wheaton suggests. Once you have specific and measurable steps toward that large goal, it’s easier to keep the momentum.

Instead of saying, “I’m going to save $100,000 for retirement,” Wheaton suggests, say “I’m going to increase my 401(k) contribution by 5% this year.” You can even break it down to how much you plan on adding to your 401(k) every three months.

Or, instead of saying, “I’m going to pay off all of my debt in one year,” she continues, try “I’m going to stop using all of my credit cards, and pay off the card with the lowest balance.” 

Mistake 3: Starting your resolutions on January 1

Instead: Arrive to the new year with a solid plan in place

There’s no automatic switch that goes off at midnight on January 1 that magically changes your behavior. Building new habits requires a bit of planning.

Wheaton suggests setting a few days aside to review your 2021 finances, to enter the new year with a solid plan in place. Here are a few questions to ask yourself while looking at your numbers for the year:

• Am I cash-flow positive every month? Do I bring in more cash than my spending?
• Am I spending too much money on my credit card then relying on an end-of-year bonus to pay them off?
• Did I end the year with more debt than I started with?
• Which monthly subscriptions can I cut out?
• Am I on track to meet my retirement goals?

Mistake 4: Keeping money goals out of your relationship

Instead: Align your goals with your partner’s

“One thing I’ve seen in my 14 years of experience is that couples need to have open conversations about their goals,” says Wheaton. “If one partner wants to save up for a house, and the other wants to save for retirement, it’s best to sit down before the beginning of the year and see how you can both prioritize goals as partners.” 

In a similar vein to the end-of-year review for individuals, couples can ask each other the following questions to get clear on new year goals:

• How do you feel about our finances this year? (This question is especially important for couples who don’t make the same amount of money but contribute an equal amount for household spending.)
• How did your credit score change this year?
• Are we on the same page about our retirement goals? Are we still on track to meet our previous retirement goals?
• Are we utilizing the best benefits our employers have to offer? Should we switch to one joint health insurance policy? 

Instead of making a vague resolution you and your partner probably won’t keep past February 1, base your resolutions on your end-of-year review and make them easier to stick with.