Micro-saving: a personal finance resolution you can keep

By Justin Boyle

This holiday season, I had a chance to catch up with some members of my extended family. I learned that a musician cousin of mine (let's call him Mark) had recently pulled himself back from the brink of bankruptcy and gotten his debt under control, which (no offense, Mark!) came as a small surprise.

I called Mark in Key West, to congratulate him as well as try and learn his secret. There were some pretty standard money management techniques involved, like consolidating debt and hunting up the best savings account rates and credit card APRs he could find, but there was another piece of the puzzle that I think merits sharing. For the past two years, Mark had been doing something he called "micro-saving."

How micro-saving can help squash your debt

In December 2009, Mark had read an article on making effective resolutions for New Year's. He was trying to lose weight, he said, or quit smoking, whichever came first. The main thing he took away from the article was this: if you want your New Year's resolutions to stick, you have to start slow.

After nearly a month of jogging a half-mile three times a week, Mark started looking for ways to avoid his newfound active lifestyle. One of those ways happened to be opening his stacks of old mail, wherein he learned that he was up against a very real threat of financial ruin.

He called our mutual aunt, an accountant, who was able to help him navigate the world of online savings accounts and consolidate debt with some low-interest balance transfers. She told him that he might be out of the red zone in three, maybe four years.

Mark has always been impatient, so he decided to make an honest effort at getting his head back above water. Taking the advice from his New Year's resolutions article, he started small, by putting away one dollar a day.

Some time passed, and Mark realized that he wasn't missing that daily dollar. He went up to two, then three, then four dollars a day as the months went by. Before long, Mark's saving became automatic. He would make his daily savings transfer almost right away after he woke up (usually in the afternoon; Key West, after all).

Why micro-saving works

A lot of people use New Year's resolutions as an excuse to take on large lifestyle changes all at once, like quitting smoking cold turkey or cutting up credit cards with money on them. Micro-saving can be the key to maintaining your financial resolutions, because it doesn't force you to radically alter habits you've had for a long time.

Rather than putting you into the uncomfortable position of forcing old financial habits away from you, micro-saving helps you sow behavioral seeds so new habits can form on their own. Once you get used to the simple act of saving, however little you put away at first, it becomes easier and easier to meet your debt reduction goals.

What's more, getting yourself accustomed to regularly saving money can help temper how much you spend. Reminding himself every day about the work he was doing to improve his financial circumstances helped my cousin cut down on frivolous spending and encouraged him to make more than just the minimum payments to his credit card bills.

Don't be a statistic

Statistics on New Year's resolutions are mixed, but no study has turned up very high rates of success. Nearly 50 percent of people fall off the resolution wagon by the end of February, and between 60 and 80 percent of resolutions fail by the beginning of summer. Don't become a statistic!

By starting slow, you can make any New Year's resolution easier on yourself and your lifestyle. This year, be one of the skillful few who teach themselves, rather than force themselves. If it can work for my cousin (no offense, Mark!), then trust me, it can work for you.