Let’s get real for a minute. I stopped setting New Year’s Resolutions because:
Why? Because making a major, lasting lifestyle change doesn’t happen overnight – it takes time.
The same is true for your financial goals. It’s easy to say you’ll stop eating out to save money, but the minute you work a long day and get home late to an empty fridge, can you stick to your plan?
I don’t know about you, but that’s when I hit up the nearest drive-through. Or better yet, order delivery. Just like that, my budget goes out the window.
So how do you set financial goals for the new year you can actually stick to? Here are some practical tips to help you out.
Wait, shouldn’t I tell you to sell all your possessions, stop eating out, live the life of a hermit and give up everything that brings you joy to reach your financial goals?
No. Because if that’s not realistic for you, you’re never going to stick to that lifestyle for the long-term.
This is why it’s important to start planning your new year financial goals by thinking about what you really want.
Ask yourself questions so you can figure out a financial goal in line with your values and work with what motivates you. For example, someone who’s driven mostly by family might have different goals than someone driven by individual wants.
Write out what you care about most and what gets you excited and motivated. What do you spend the most time doing? What expense would you absolutely never consider cutting because it’s too convenient or you get too much joy from it?
Remember – working towards financial goals isn’t about eliminating all joy from your life, it’s about clearing out things that aren’t important so you can focus on what you truly want.
Once you know what you value, you can set money goals that support your life, rather than get in the way of it.
Maybe you have lots of goals. Or maybe, when you think about money, you stress about all of it and want to fix everything at once. You feel overwhelmed and don’t know where to start.
Take a look back at that list of things you value and what motivates you and pick one or two goals that most closely align with what you want, love, or need in life.
Is your goal to free your family or yourself from financial worry by building an emergency savings fund? Do you want to save money so you can afford to take a few days off work? Do you want to payoff debt? Something completely different?
Pick one or two and focus on them. If you try to tackle everything at once, you could get overwhelmed and not tackle anything.
I speak both from working with clients one-on-one and from personal experience when I say:
If you want to get serious about turning your finances around and improving your financial well-being, you have to get real about where your finances stand right now.
This is the hardest part of the whole process! Many people get to this step, panic, get overwhelmed and give up. They don’t want to know how bad their financial situation is. They don’t want to face it.
So they give up and never rip off the Band-Aid.
I get it, I’ve been there. If your main financial concern is debt-related, it can really stink to look at just how much you owe.
This may be the hardest part, but it’s also the most important. If you want to move forward:
How much money do you really owe? How much savings do you really have? Look at your billing statements (credit cards, student loans, utilities, etc.) and write down how much you pay each month. Look at how much you spend on groceries, shopping, eating out, subscription services, etc.
Add it up and ask yourself - is this sustainable? Is it in line with your values and goals?
If yes, congrats, you’re done! If no, let’s move forward and take action.
Once you’ve figured out your top one or two goals and have a realistic picture of your finances, it’s time to break your long-term goals into smaller steps. This is where it’s time to think S.M.A.R.T.
SMART goals are goals that are:
Actionable / Achievable
What does it mean to set SMART goals? It means you set goals you could realistically achieve with specific milestones to hit and measure your progress on the way to your larger goal.
Is your goal, for example, to save a $1,000 emergency fund? Try breaking that number down into smaller amounts, like $100 or even $10. Give yourself actionable steps to reach that savings, such as eating out just once a week instead of 3 times a week and putting the extra money in a savings account.
This makes working towards your larger goal more motivating.
Next, make sure your goal is actionable and realistic. You wouldn’t expect to lose 200 pounds in a week, so don’t expect yourself to completely change your financial habits overnight! When you fail to meet an unrealistic goal, you might give up.
BUT if your goal is more achievable, like losing 5 pounds over the next month, and you have a specific action plan in place to start walking 20 minutes a day and switch to salads for lunch, that goal is both realistic and achievable.
Finally, set a specific timeframe for each milestone. If you keep putting off your financial goals until later, you’ll never achieve them! So set deadlines for yourself.
The best part? You can use this approach to set goals for your life outside your finances too.
Once you’ve gotten this far, create an official action plan for yourself. Put your ultimate goal and any milestones, deadlines, etc., on it.
Share copies with your friends, put it in a spreadsheet, or print it off and put it on your fridge. Keep it somewhere you can see it easily and track your progress. Each time you hit a milestone or finish a short-term goal, check it off your list (or put a gold-star sticker on it, if that’s your thing!)
Also important to note – if life gets in the way or you get knocked temporarily off track – forgive yourself and get back on the wagon.
There are tons of great apps these days, so take advantage of them! Use them to help you hit your financial goals.
For example, grab a tool to help you with budgeting, such as Mint or You Need a Budget.
Automate your payments to save money or pay off debt. Use this option to avoid missed payments, to automatically route money into savings, or to make an extra payment on debt, for example.
Don’t have a savings account and want to start one? Many online banks don’t require a minimum deposit to get started and offer high-yield savings accounts well above what brick-and-mortar banks pay. So don’t let lack of funds or lack of a bank in your neighborhood stop you from reaching your goals.
Don’t have credit or have bad credit and need to build it? Find tools that could help you build the credit you need.
To go a little Paolo Coehlo on you:
“When you want something, all the universe conspires in helping you achieve it.”
There is literally an entire universe of financial tools out there waiting to help you achieve your goals. Find one that works for you.
While tools are helpful, finding your own community of people to support your financial wellness journey is also important. Recruit your friends and family to hold you accountable. Make a pact with your partner to work on your financial well-being together.
If you need extra help setting and reaching your goals, consider getting help from an Accredited Financial Counselor. Or use SpringFour to find resources in your local community that could help you improve your financial situation.
This new year, throw your New Year’s Resolution out the window (and maybe give it a good kick-in-the-butt on the way out). Instead, set SMART goals that line up with what you value, build the community and technology you need to support you through the process, and see your financial goals through to the end.
You got this.
Lauren Bringle is an Accredited Financial Counselor® and Content Marketing Manager with Self Financial – a financial technology company with a mission to help people build credit and savings.