Posted on Friday 03 January 2020
Setting goals is tough. It takes a lot of self awareness to know It’s hard enough to choose the best goal for you—and once you have identified your goal, your battle has only just begun.
No matter what your goal may be, the biggest mistake that you can make when creating financial goals for yourself is setting a goal that you simply can’t achieve. And it’s a common problem—as many as 92 percent of people who set goals fail to achieve them. To avoid sending your New Year’s resolution off to the Island of Misfit Toys, your goals should be both realistic and attainable. You should be able to actually see yourself getting from point A to point B.
Worried that you might be setting unrealistic financial goals? Don’t be. You can totally start 2020 off right by understanding how to set goals that you can actually meet! In the sections below, we’ll give you the best tips on how to create goals that will set you up for success in the new year.
How do you know if your goal is actually attainable? One of the best ways to evaluate whether your goals are going to set you up for success is by running them through the SMART principles of goal-setting. Anything that you choose for your financial New Year’s resolutions should be:
Try to make your goals as specific as you can. Let’s say you want to start chipping away at your credit card debt (and let’s be honest, that’s a goal that we could all make for 2020). Narrow it down even further by saying you want to eliminate a certain amount of debt. Or maybe 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.
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. (And if you’re really organized, you can even segment your payments out further into a certain amount of money each week.) Use this same approach to paying off an entire credit card: get specific about how much you will need to pay each month in order to reach that goal.
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?
It’s important to make sure that you can track your progress—not only to give yourself status updates and see where you are at, but also to get a boost of motivation every now and then. Sticking to your financial goals can be tough (because they so often mean making sacrifices), but seeing changes over time is a great way to keep your head in the game over the long term.
Do you have the right support in place to help you get from point A to point B? Does thinking about achieving your goal make you feel motivated or challenged, or are you completely overwhelmed? It’s normal to feel challenged by your financial goals—but once you start crossing over into feeling overwhelmed, that may be a sign that you are setting an unachievable goal. And sometimes all it takes is a little bit of support to turn an unachievable goal around.
For example, if you want to decrease your credit card debt but don’t have a clue on where to begin, you can start reading online resources, listen to financial podcasts, or sign up with a credit counselling service for expert advice.
This goes hand-in-hand with setting achievable goals—but setting realistic financial goals for New Year’s 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 shouldn’t be setting a goal of saving $10,000 this year. And if the credit card you are trying to pay off is a card that you will need to continue using throughout the year, it might not be realistic to eliminate that balance entirely.
Set the right parameters around your goals to ensure that they are actually 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—and depending on the type of goals that you choose, there might even be a series of mini deadlines throughout the year.
Maybe you decide that you want to split your year of credit card payments into four quarterly deadlines, giving yourself a date to have X amount paid. You can choose the schedule that works best for you—there are no hard and fast rules about creating timely financial goals. No matter what schedule you put yourself on, making specific deadlines is a great way to keep your goal top of mind and ensure that you 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 goal ideas are winners, even after you’ve gone 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—this part can be messy and disorganized.) You’ll find that after a few minutes of jotting down ideas, you’ll notice that some ideas start to feel like a better fit than others. Maybe thinking that you want to get better at saving doesn’t do much for you, but it’s possible that creating a budget or spending less money on takeout feels like a better fit.
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 yourself 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—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 a debt.
We’re all used to multitasking: it’s become a part of life (and for many, a necessity in order to make it through the work day). The typical Canadian employee does it every day: they’re answering emails while on a conference call, solving a client 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—but that can put you in danger of getting frustrated, losing focus, or slipping off track. 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, either. 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—and use the SMART principles of goal-setting to start laying the foundation for healthier finances in 2020. Trust us, your future self will thank you!