Posted on Friday 03 January 2020
Setting financial goals is tough. It often takes a lot of self-awareness to set goals and go through with them. It’s hard enough to choose the right goals for yourself. However, the true challenge only starts after you have identified what your financial goals are.
Regardless of the goal, the biggest mistake you can make is setting a goal that you simply can’t achieve. Unfortunately, this is a common problem. As many as 92 percent of people who set goals fail to achieve them. Your goals should be realistic and attainable. You should be able to see yourself getting from one point to the other.
If you are worried that you may be setting the wrong financial goals, there's no need to worry. Instead, you can start 2020 right by understanding how to set goals that you can actually meet.
We’ll share the best tips on creating goals that will set you up for success in the new year below.
How do you know if your goal is attainable? One of the best ways to evaluate whether your goals will set you up for success is by running them through the SMART principles of goal-setting. As such, anything you choose to put on your for your financial New Year’s resolutions must pass the following criteria:
Make your goals as specific as you can. For example, let’s say you want to start chipping away at your credit card debt. This is a pretty important goal. Narrow it down even further by saying you want to eliminate a certain amount of debt.
Or perhaps, you want to use a short-term loan to consolidate some of your debt and save on interest. Whether you want to bring your overall credit card balance down to $300 or if you want to pay off a few cards entirely, you need to be as specific as possible. Or even if you have a simple goal of earning passive income.
If your goal is to decrease your credit card debt to a certain amount, you can divide that up by X number of months and decide how much you will pay each month. To keep things organized, you can segment your payments out further into a certain amount per week.
Use this same approach to paying off an entire credit card. Get specific about how much you will need to pay each month to reach that goal. It's even possible you would need a cash advance to get things going. That works. Just make sure you are specific and plan things out accordingly.
Can your goal be tracked throughout the year? How will you measure your progress and check in on your status from one month to the next? First, it’s important to make sure you can track your progress. This keeps you updated about your situation.
It also helps to keep you motivated now and then. Sticking to your financial goals requires making some sacrifices. This is tough. However, seeing changes over time is a great way to keep your head in the game in the long term.
You can ask yourself these questions:
Do I have the right resources in place to help you get from point A to point B?
Does thinking about achieving my goal make me feel motivated or challenged, or am I completely overwhelmed?
While it’s normal to feel challenged by your financial goals, feeling overwhelmed by them tells you that you are setting an unachievable goal. Sometimes, a way to turn this around is to get the right support and resources.
For example, suppose you want to decrease your credit card debt but have no clue where to begin; you can start by reading online resources, listening to financial podcasts, or signing up with a credit counselling service for expert advice.
This goes hand-in-hand with setting achievable goals. Setting realistic financial goals for New Year’s just goes one layer deeper.
You could have all of the educational resources and support in the world, but if you can only set aside $200 for savings each month, you can't reach a $10,000 savings this year. And if the credit card you are trying to pay off is a card you will need to continue using throughout the year, it might not be realistic to eliminate your balance entirely. This will only lead to financial stress.
Set the right parameters around your goals to ensure they are indeed attainable. Don’t fall into the trap of setting your sights too high right away. Being realistic about your goals is crucial to ensure that you are setting yourself up for success in 2020.
Deadlines are important when it comes to setting financial goals. You should have a specific end date in mind. Depending on the type of goals you choose, you can set a series of mini-deadlines throughout the year.
For instance, you can decide to split your year of credit card payments into four quarterly deadlines, giving yourself a date to have X amount paid.
You can choose what works best for you. There are no hard and fast rules for creating timely financial goals. Regardless of the schedule, you put yourself on, making specific deadlines is a great way to keep your goal top of mind and ensure to stay on track throughout the year.
Writing down your goals is all about staying accountable. Not only does it help your goal stick into your subconscious, but it can also be a great opportunity to organize your thoughts and separate the wheat from the chaff. Not all goals you have are winners, even after you’ve run them through the SMART goal-setting process.
If you’re stuck on what your goal should be, take a few minutes to sit down and start writing. Don't worry if your jottings are messy. You’ll find that after a few minutes of jotting down ideas, some start to feel like a better fit than others.
Thinking that you want to get better at saving may not do much for you. Instead, it’s possible that creating a budget or spending less money on takeout feels like a better fit. Or perhaps, if you had previously thought to convert from using cheques to using money orders, writing this down may help you realize it has a little overall financial growth impact.
If you already know what your financial goals are going to be, writing them down is your chance to start getting familiar with the details and plan out the steps to get there. This gives you a chance to really think about your goal, why you are making it, and what it will take to get there.
You can even go a step further and write down what the payoff will be. For example, it’s a lot easier to stomach making a $200 credit card payment each month when you know the result is paying less interest, boosting your credit score, feeling less stressed about your finances, or simply the satisfaction of knocking out debts.
Multi-tasking has become crucial to contemporary life. It is, in fact, a required skill for some jobs. You are answering emails while on a conference call, solving a client's problem while brainstorming with a co-worker, or making a dinner reservation while answering a text and following GPS directions on the commute home.
But when it comes to setting realistic financial goals, the key is to avoid multitasking as much as possible. Granted, this is easier said than done, especially when you’re looking at a larger financial goal such as saving for retirement, diversifying your portfolio, or learning how to manage a budget.
When you’re looking at a big, complicated goal, it’s tempting to start working on multiple pieces at once. This can put you in danger of frustration. Instead, break apart a larger goal into smaller pieces to make the process more manageable. Focus on one step at a time, and don’t let yourself get distracted.
There’s also an argument that multitasking isn’t great for your brain. Multitasking can make it harder for your brain to focus or distinguish relevant information from irrelevant, ultimately decreasing your quality of work. When you’re working toward a goal, you want your productivity and your output to be as high-quality as possible. Be easy on your brain and give it a break from working on multiple things at once. You’ll be much more likely to achieve your financial goals.
Giving yourself financial goals in the new year is a wonderful way to set yourself up for success for years to come. Take some time to think about your goals and all of the steps that you can take to get there. Use the SMART principles of goal-setting to start laying the foundation for healthier finances in 2020. You can also apply these rules to the goals you set towards advancing your career. In no time, you'll be on a fast track to financial success.