3 Signs Your Financial Decisions Are Completely Unrealistic
The start of a new year is a popular time to set various financial goals and priorities. And a recent study from The Ascent found that 67% of Americans are making financial resolutions for the new year.
Working towards different goals is a great way to improve your financial situation and give yourself something to feel good about. But setting unrealistic goals can cause the opposite to happen. You may end up failing and being miserable. With that in mind, here are some signs that the financial solution you’ve decided on isn’t really achievable:
1. You have to give up all your favorite purchases.
Perhaps you’re looking to increase your emergency fund from $0 to $6,000 this year. In theory, this is a great goal because you’ll be well protected against unplanned expenses or job loss.
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But saving $6,000 a year means saving $500 a month. If you bring home $2,500 a month and your essential spending is $2,000, this means you would need to spend the following to save $500 a month. naught In my spare time, I do extra things like watching streaming services or the occasional takeout meal.
It’s definitely possible to reduce those things. And if you don’t have any cash in your savings account, this is honestly an important thing to do.
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But it’s not reasonable to tell yourself that you’ll spend $0 on fun purchases this year. Instead, you might want to consider a compromise. Aim to save $250 per month or $3,000 per year. That still leaves you with some cash left over to spend on things you love. At the same time, it provides a cushion of $3,000.
2. To succeed, you have to keep working hard.
You may be aiming to buy a home this year, but you’ll need to boost your income with $20,000 in side income to save for a down payment. $20,000 might be possible if you’re willing to work every waking hour. But who would want to live like that?
It’s not a bad idea to put in some extra time if you can increase your income and improve your financial situation. But there is a difference between working 50 hours a week instead of 40 and working 70 hours a week. The latter can have negative effects on physical and mental health.
3. Depends on factors beyond your control.
Your goal may be to get a raise in 2024. But if you’ve been working at the same company for three years and know that pay raises are rare at your job, your goal may not be a good one. , because it’s something you can’t control.
Of course, you can put in extra hours to do your best work, improve your skills, and impress your boss. But that doesn’t guarantee you’ll be the proud recipient of a pay raise.
Instead, focus on the following goals: is Within your ability to control. For example, if you buy lunch every day and spend $10 per meal, tell yourself you’re going to cut back and save $100 a month. It’s something you have the ability to do.
The point of making financial decisions is to feel good about your finances and yourself. Setting unrealistic goals can have the opposite effect, so aim to set goals that are achievable and won’t cause you misery.
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