I heard once that as many as 50% of people make a New Year’s Resolution; whether or not they all follow through with it is a different story. However, I do believe setting goals for yourself makes it more likely that you will achieve them. One of the most common New Year’s Resolutions, and the one that I’m most passionate about, is improving your finances. Here are some tips, based on my personal experience, on how to plan your 2017 financial goals.
Assess your situation.
Take an honest look at your finances over the past year. In what areas did you excel and in what areas did you come up short? In this step, I look strictly at the “big picture.” Beating yourself up over past mistakes is not helpful; however, looking at your mistakes and determining how you can fix them in the future is.
Set “SMART” goals.
As a big goal-setter myself, one of the keys to setting goals is to set “SMART” goals. SMART is an acronym for specific, measurable, attainable/action-oriented, realistic, and timely. If one of your goals is to pay off debt, determine how much debt you want to pay off. How will you pay off your debt; will you be cutting expenses, increasing your income, or both? When do you want the debt paid off by? If you set a goal to pay off $20,000 of debt without drastically decreasing expenses or increasing income, then that will be nearly impossible to achieve and, if not achieved, very discouraging.
It’s often better to set a smaller goal that you can achieve than a big or vague goal that you might not reach. Achieving goals creates momentum to help you tackle even more goals down the road. Don’t set the bar too low, but be sure to have a concrete plan to achieve the goals you set.
Set your budget for 2017.
One of the keys in successfully meeting financial goals is to know how much money you have coming in and going out each month. Since I have been budgeting for years now, I look through all of my monthly budgets for the previous year to see where I need to make adjustments. Sometimes I need to increase my budget for a certain area, while other times, if I am overspending, I will come up with a plan to not overspend in that area. I also look at the calendar to see what events I have going on that will require adjustments to my budget, such as weddings, holidays, and birthdays. Clearpoint’s budget calculator is a great tool to help you get started.
Look at the “baby steps” before setting more advanced goals.
The “baby steps” are taught by financial guru Dave Ramsey, and although I don’t agree with everything he teaches, starting with something like his “baby steps” is essential to setting beginner goals. The first baby step is to create a mini-emergency fund of $500-$1,000, although if you feel more comfortable slightly increasing that amount then you should do so. Then, pay off all debt (excluding mortgage) by using the debt snowball (paying off debt from smallest amount owed to largest amount owed, regardless of interest rates). Up next is to fully fund your emergency fund with six months of household expenses; again, if you are more comfortable increasing this amount, that is perfectly fine. Once you have completed these goals, then I recommend moving on to more advanced goals, such as aggressively saving for retirement and your child(ren)’s college.
And keep in mind that people disagree over the order of goals. There’s a strong case that you should build the fully funded emergency savings first, and then take on your debt. How you proceed will depend on your personal situation and preferences, along with your risk tolerance.
Share your goals with others.
A few years ago, I lost 100 pounds and have managed to keep the weight off. One of the keys to my success with weight loss was sharing my fitness goals with others. That concept has followed me to every goal that I set in life. I am more likely to stick to something when I have friends and family checking in to see how I’m doing with my goals (which is why I blog my weekly to-do lists, which are essentially mini-goals). Even though the topic of discussing finances can be taboo, find a few trusted people to share your financial goals with. If you don’t have anyone personally you can talk to, there are many Facebook groups and blogging communities where you can share your financial goals with others.
Leave Your Mark on 2017!
I hope you’re able to make some big waves in 2017! Here’s to improving your health and wealth, and remember that if you need help with credit and debt specifically, Clearpoint is here to assist. A credit counselor can help you create an action plan to take control of your money in 2017.