Welcome to New Year’s resolution season. Time to nod along supportively as friends, family and acquaintances tell you about a far-fetched plan to only eat grapefruits, walk 25k a day or embark on 75 hard.

Unconventional wisdom is my New Year’s resolution. Conventional wisdom is a byproduct of groupthink that presents solutions good enough for the average person while simultaneously not being right for any individual. You follow it at your peril. The more different you are from the person that defined a rule the less you should follow the rule. This weekly column published each Monday will challenge the investing norms that just may be holding you back from living the life you want.

The folly of New Year’s resolutions

You will never be happy if you continue to search for what happiness consists of. You will never live if you are looking for the meaning of life.
- Albert Camus

Exercise was invented in 600 B.C. That is when the Greeks figured out that if you took part in unappealing strenuous activity enough times you would get stronger and faster. On January 1st 599 B.C the Fitness First in Athens had a lot more visitors than normal. History would suggest this overcrowding will be a short-lived affair.

Most resolutions fail. 25% of people quit their resolution within the first week. Prior to the end of January 68% of people have given up. Only 9% of people succeed in keeping their resolution. Yet despite these dire stats people continue to make resolutions. In 2024 73% of Australians made at least one New Year’s resolution according to Finder.

Given the lack of success in keeping New Year’s resolutions I’ve outlined three tips to get more out of this annual ritual of trying – and failing - to improve ourselves.

Tip 1: Create structure and a framework to keep going
Tip 2: Focus on understanding how your sacrifices today will impact your future
Tip 3: Acknowledge that progress is replacing your old problems with new ones

Tip 1: Create structure and a framework to keep going

Most New Year’s resolutions follow a familiar formula. In a fit of motivation induced by the dwindling days of the year a radical change is proposed. The best part is that the radical change doesn’t have to start immediately. It can start next year. This feels good and allows the resolver to wantonly consume champagne on New Year’s Eve with the smug satisfaction that next year will be different.

One problem with resolutions is the radicalness of the proposed change. The scope of the change makes it difficult to maintain. That is why so many fail in such a short amount of time. Consistency is the key for a successful resolution. Consistency is also the key to investing success. This is achieved through good habits which come from incremental progress.

Regardless of your financial goal for the year the key to success is creating a framework that will guide your decision making. For money related resolutions the framework should consist of a defined financial goal and an investment strategy to achieve it.

If you want to save and invest more money in 2025 figure out how these incremental savings will help you achieve your goal. If you want to become a better investor create an investment strategy to apply more structure to your decision making.

Quantifying a goal and putting context around your saving and investment approach may be the motivating factor it takes to keep going. Successful resolutions are focused on the desired outcome rather than completing a set of activities. Just as successful investing is based on goals and a strategy designed specifically to achieve it.

If you are looking to make changes to your finances this year start with you. What are you trying to achieve in your life by saving and investing? What is your investment strategy to achieve your goals? Use some of the resources at Morningstar to establish the foundational framework that will allow you to join the 9% of people that keep their resolution.

Tip 2: Focus on understanding how your sacrifices today will impact your future

It is hard to stay motivated when it is difficult to see progress. This is why resolutions related to saving and investing are so hard to keep. People constantly extol the benefits of compounding. And compounding is the secret to building wealth. But the simple truth of compounding is that the benefits from your sacrifices today won’t be clear until far into the future.

We can start with a goal of becoming a millionaire. To get $1m you need to save $710 a month for 30 years at a 8% return. You hear things like this all the time from self-proclaimed personal finance gurus. They are supposed to be motivating. And they often motivate you to get started. $710 a month seems a small sacrifice for $1m in the future.

The problem is that if you don’t understand compounding it appears as though you aren’t making any progress. 30% of your million dollars is generated in the last 5 years. 5.18% is generated in the first 5 years. Each of those 5-year periods make up just under 17% of your total time saving and investing. The simple maths of compounding makes it hard to see progress. This makes it easy to give up.

A one-year period is an opportunity for progress. It is not the year you are going to get ‘rich’ – whatever that means. Trying to dramatically change your financial position in a short time will only make things worse. You will chase performance, over trade and your results will suffer. A defined goal and strategy will help you be a more patient investor. And patient investors are successful investors.

Tip 3: Acknowledge that progress is replacing your old problems with new ones

To explain another reason so many resolutions fail I’m going to borrow from Mark Mansen who wrote The Subtle Art of Not Giving a F*ck. When most people make resolutions they picture a future idealised version of themselves. This follows the conventional advice. We are told to envisage success. Create vision boards. Manifest your way to a better you.  

What we often visualise is reflective of the popular portrayal of success. It isn’t reality. We think once we hit a certain net worth we won’t worry about money. We think that if we own a house we will feel financial secure. Reality is different. Having more money does not alleviate you from worrying about money. Owning a home will not eliminate the feeling of financial insecurity.

As Mansen outlines in his book the key to achieving a goal is to accept that it will be hard to do. Success comes from embracing the day-to-day struggle. It isn’t a result of affirmations or manifesting success. Perhaps most importantly, it is accepting that solving one problem will introduce new problems to your life.  

If you are chasing the way you imagine you will feel if you are ‘rich’ you will never succeed. You won’t feel the way you imagine and you will quit. Wealth is built over time and as you gain financial security you will stop worrying about some things and start worrying about new things. This is progress. But you won’t feel any better. There is no state of nirvana regardless of how ‘success’ is conventionally presented. I’ve experienced this myself.

By any rational measure I should feel financially secure. My wife and I have good salaries. We have low amounts of fixed expenses in comparison to our earnings and can spend freely on things we love. We have amassed more in savings and investments than most Australians. Yet I’m still stressed about money.

I know how lucky I am. I know that much of my stress about money is an irrational self-created ‘problem’. I know my ‘problems’ don’t compare to the problems that many Australians face. They don’t compare to my money problems as a 22-year-old. The point is that the way I feel about money is not how I anticipated feeling.

Try to keep this in mind when setting resolutions. You are never going to feel like you’ve made it. Your finances will never be bullet proof. Focus on the ways your life gets better as you continue the journey towareds financial independence. Your finances are an enabler of the life you want to live. Don’t forget to live it.

Final thoughts

The financial outcomes you achieve are up to you. Super rules will change, taxes will go up and markets will fluctuate. When these things happen your initial inclination will be feelings of victimhood. The world is not against you. You are in control. And once you achieve your goals you won’t feel the way you expected to. But that is ok. Your new problems will be better than your current problems and that is all that matters. Here is to a great 2025.

Please share any thoughts or topic suggestions with me at [email protected]  

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What I've been eating

2025 will be a good year if I eat more Peking Duck. The first recipe for Peking Duck appeared in a Chinese cookbook in 1330. At the time it was a dish only served in the Imperial Court of the Yuan Dynasty. But this was a dish too good to reserve for the emperor. The first restaurant specialising in Peking duck opened in Beijing in 1416. I'm glad it is still around. This is a duck I had over Christmas at a wonderful Cantonese restaurant in Hong Kong named Man Wah.

Duck