How to create New Year's resolutions that actually work

Millions of recession-weary Americans are making New Year's resolutions to spend less, save more and be more responsible with credit. But without a plan, experts say you're likely doomed to fail.

The good news is that with careful and realistic planning, you just might be able to keep that resolution and move closer to your dreams of greater financial stability.

Resolutions are becoming more and more popular amid today's double-digit unemployment and general economic uncertainty. Three in four Americans will make at least one financial-related New Year's resolution in 2010, according to a survey from Omaha-based brokerage TD Ameritrade and the Opinion Research Corp of Princeton, N.J. That's up from 71 percent in 2008. And despite the popular belief that resolutions don't often work, the survey found 60 percent of those who made financial resolutions last year reported they were still "going strong" -- though it is possible that more people say they keep their resolutions than actually keep them.

With that in mind, we spoke with personal finance experts to get their thoughts on what actually works.

The '3 Rs' of resolutionsTo start with, they say resolutions that work follow "the three Rs."

They should be:

1. Reasonable. 2. Realistic. 3. Rewarding.

That means that goals shouldn't be so lofty that they're unattainable, and planning for them should include ways to both hold yourself accountable and to pat yourself on the back for a job well done.

Here's more of what these experts had to say.

Kathleen Gurney, CEO Financial Psychology Corp.Resolutions are incredibly emotional things. Gurney, a psychologist based in Sarasota, Fla., says you can't forget the emotional component of cutting back. If you do, you're making an already challenging endeavor just that much more difficult.

"When you say you will cut out all family splurges for the next three months, can you emotionally afford that?" Gurney says. "By about February, you may become really resentful that you don't have that time to de-stress with your family."

To keep the emotional impact to a minimum, Gurney offers the following suggestions:

Remove as many willpower decisions as possible. If your resolution is to spend less and your favorite activity with a friend is shopping, find another way to be together, and let the friend know why. If you are prone to spending what you make, sign up for monthly automated savings.
Keep track daily. Gurney suggests keeping a daily journal and writing down three things you did well toward keeping your resolutions and three things you need to do to improve. This is a way to reward yourself daily and reinforce the behavior changes you're making.

Leigh Ann Fraley, blogger"Save Leigh Ann -- The Daily Rantings of a Bulimic Shopper"Recording daily progress on her spending goals and writing about her debt in a public way made all the difference for Fraley, who racked up $19,947 in credit card debt before she began blogging about her financial struggles in 2005. She maxed out cards despite the fact she was a financial educator at a bank in California and lectured groups on how to manage their finances. Through her blog, she was accountable to herself and her readers.

She wiped out her debt in a year with the moral support of readers who clicked into her blog, which she still maintains. Last year, she was laid off and took on more credit card debt for COBRA insurance payments. But now Fraley, who just turned 40, has been rehired by the bank and has a four-month plan for becoming debt-free again.

She offers this advice on making resolutions:

Get an accurate picture of what you owe. Stop the denial. Open up the bills and get the real picture, she says. "People usually think they are worse off than they are, and they think there's nothing they can do."
Don't just vow to give up the lattes. Invest the latte money. "Take that $2.50 and move it over every day into a savings account with online banking. Then you can see it add up."
Cut up your credit cards if you don't trust yourself. Fraley cut hers up and now keeps the pieces in a transparent box as a warning. (See video: How to cut up a credit card)

Nicole Mladic, blogger"The Budgeting Babe"Mladic of Oak Park, Ill., 30, had $25,000 in student loans by the time she moved out of her parents' house. She then quickly realized her reserve was rapidly draining and she had to act. She says setting small, achievable goals and getting educated about finances help maintain resolutions.

Many people her age are struggling with debt. In the TD Ameritrade survey, more than half of Americans between the ages of 18 and 34 said they are more likely to make a financial-related resolution in 2010 than they were in 2009. Mladic offers these suggestions:

Start small. For instance, open a savings account and vow to save $25 a month instead of saying you will save for a down payment. Also, you can resolve to increase your 401(k) contribution 1 percent at a time. She says she started with 2 percent and is now at 10 percent plus her company's match.
Get educated. She felt she didn't know nearly enough about finances to reverse her situation and neither did many of the young women she knew. She started a blog called The Budgeting Babe in 2004 and continued it until late summer 2009. Months later, she made her last student loan payment.

Kit Yarrow, consumer psychologist, author"Gen BuY: How Tweens, Teens and Twenty-Somethings are Revolutionizing Retail"Yarrow, a psychology and marketing professor at San Francisco's Golden Gate University, says the new year often follows a bloated feeling of overspending, which is a motivator for change.

It's also when people find more support for their resolutions, and that's an important part of maintaining them. Stop-smoking, weight-loss and financial-help programs commonly roll out after the new year. Even if you don't join a group, Yarrow recommends giving a verbal commitment to at least a few people when you make your resolutions.

"It's funny. People will cheat on themselves before they'll cheat on someone else," she says.

She also recommends these tips for keeping resolutions:

Post tangible reminders. "Visual cues are very important, especially for young people raised on the Internet. Tape up a picture of the thing you are working toward as a constant reminder."
Emphasize positive action. When making a resolution, she says, focus on what you should do rather than what you should not do. Instead of focusing on not shopping or not having, find something proactive to do, such as budgeting or writing down expenses. In some ways, that will help replace the loss, she says.
Celebrate a milestone. Acknowledge a month of good budgeting or three months of reducing debt. But don't reach for the wrong reward -- like a spending binge, she says.

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