One of the most common New Year’s resolutions is related to personal finance. I want to encourage you to NOT set broad resolutions, but instead set specific financial goals that you would like to achieve. This is how you can set achievable financial goals this year!
Types of Financial Goals
There are several different types of financial goals you can set. Some include paying off debt, building up savings, increasing your income, or building up your retirement fund. If you’re not sure where to start with either of those goals then I suggest following Dave Ramsey’s 7 Baby Steps to Financial Peace.
The 7 Baby Steps give you a clear picture on what financial goal to focus on first. If you try to focus on too many at one time then you will not make very good progress on either. The Baby Steps make it simple so you can gain traction in one area at a time.
Make Your Goals SMART
The difference between a resolution and a goal is that goals are specific and have a timeline to them. SMART is an acronym for Specific, Measurable, Attainable, Relevant and Timely.
Specific
“I want to pay off student loan debt” is not specific enough. That would be considered a resolution. Put a number to it. “I want to pay off $12,000 in student loan debt” is specific.
Measurable
A measurable goal is something that can be tracked. “Paying off $12,000 of student loan debt” is measurable. You can keep track of your progress by every $500 or $1,000 of your loans you pay off.
Attainable
Is your goal attainable? Set a goal that will stretch you a little bit but don’t make it so easy that you are limiting your potential.
Relevant
Your goals must be relevant to what you’re working to achieve, not what someone else is trying to achieve. If you don’t have any passion or drive towards that goal then it will be very hard to complete the actions that need to be done to get there.
Timely
Set a time deadline for each of your goals. Setting time limits helps you stay focused. “I want to pay off $12,000 of student loan debt by December 31” gives you a deadline. Each month you can see how much progress you are making towards that deadline. Without a deadline it can be easily forgotten.
Staying Motivated with Your Financial Goals
When you set a large goal it may feel overwhelming at first. To reduce the overwhelm, break down your large goal into several mini goals. Break down a yearly goal into months or quarterly. In the “pay off $12,000 by December 31st” example, you can pay off $1,000 of student loan debt each month.
Remember to celebrate each milestone (mini goal) that you accomplish! This is how you stay motivated to keep going.
If for some reason you don’t meet your goal, try to not let that discourage you. If you only paid off $10,000 of the $12,000 goal, focus on the positive. You paid off $10,000! That is probably $10,000 more than you would have paid off if you didn’t set the goal in the first place.
Action Steps
It’s great to have a goal but now you need a plan to achieve that goal. As Brian Tracy once said, “A goal without a plan is only a dream.” This is where your action steps come in. These are daily or weekly commitments that you can do to work towards that goal. Some action steps for paying off $10,000 in student loan debt may include:
- Make a monthly budget
- Make a debt snowball list
- Find ways to save money each month
- Plan more meals at home (not eating out as much)
- Sell things
- Get a part-time job
“A goal without a plan is only a dream.”
Brian Tracy
Accountability
Creating SMART goals for each year is a great start to achieving your financial goals. Now you want to take the right steps to making progress on those goals. This is where having a mentor or accountability partner is helpful.
Having an accountability partner will help you stay on your path. That is one of the benefits of having a financial coach guide you. As your coach, I can help you create a simple and proven plan to achieve your financial goals! Schedule your free Money Checkup to get started!