Setting Financial Goals for the New Year
12/11/2024
There is something special about opening a fresh calendar at the start of the new year: blank pages waiting to be filled, 12 months of plans and possibilities ahead. But we also know what happens as we get deeper into the year; the days fill up, time gets away from us, and we find it difficult to remember the goals we’d set in January.
This can be especially true for your financial goals. Surprise expenses, market instability, and economic challenges can wear down on your plans throughout the year. So, what can you do to ensure you progress all year, even when the unexpected happens?
The key is to create your financial goals for the year and then build out the systems that will support those goals. Even if you’ve fallen short on your resolutions year after year, this year can be different with the suitable systems in place. Here are some tasks and methods to help you stay on track:
That shows that even if you don’t achieve every goal you set, just having resolutions in place can help point you in the right direction and give you motivation and a sense of accomplishment to keep going.
Assessing Financial Progress
Review the past year as a whole. How was your financial health? What goals did you achieve, and what setbacks or challenges did you face?
This assessment helps you determine where you are now and what’s already working well. You don’t have to reinvent the wheel; if something works for you, try to find ways to continue incorporating that strategy. Similarly, identify any areas that need improvement or methods that need to be given up because they don’t help you achieve your most important goals.
Learning from Mistakes
Some people shy away from digging into the numbers and finding where they slipped up or veered away from their money goals. But this is a key step that will help you make better decisions in the future.
It’s not about beating yourself up for the things that went wrong. It’s an opportunity to find where you struggle and put strategies into place that will help you avoid those pitfalls in the future.
Celebrating Successes
Take a moment to celebrate the financial milestones and achievements of the past year. It’s easy to get distracted by what went wrong, but making a point to recognize what went right will help you stay the course and build confidence in your ability to pursue your goals.
Specific:
One of the most common financial resolutions is “save more money.” But an objective like that is doomed to fail because it’s too broad. Try to get specific about what you want to achieve. Instead of saving more money, aim to save a certain amount in your retirement account or create an emergency fund that covers three months of expenses.
Measurable
Nebulous money goals can feel so out of reach that they can discourage you from trying to achieve them.
But once they’re measurable, it’s easier to see how to tackle them gradually.
If you want to pay off your student loans, saying, “I want to pay off $10,000 in student loan debt” is not enough. Dig deeper and think about the habits that will get you there. Create a budget to free up some money to put toward that debt, and set up automatic transfers to help you stay consistent. Those bite-size tasks can make a significant impact over a year.
Achievable
The foundation of success is built on your everyday habits. Sometimes, you must start with smaller, more achievable habits before conquering the loftier ones.
The right goal for you is probably something that’s a little bit challenging. It's doable, but it requires you to stay consistent and learn new habits. Try focusing on one area of your finances first and adding more goals as you see progress with your habits and systems.
Relevant
With everyone sharing their plans for the new year, it can be easy to follow other people’s resolutions or wonder if yours are enough.
The goals you set for yourself need to align with your personal vision of success and values. Try not to stay focused on what others are doing, because their vision might not be right for you.
Time-Bound
Some goals you can check off your list in a month; others will take years. Knowing the time commitment for each will help you understand if you’re still on track throughout the year.
Saving up for a spring break vacation is a short-term goal that’s easier to plan for.
However, for the goals that will take longer to achieve, try breaking them down into smaller parts. If you want to save up $100,000 for a down payment on a home, focus only on what you can realistically save up in one year. At the start of the following year, assess where you are and set a new goal amount accordingly.
Giving yourself deadlines will help keep you on track and give you a guidepost to assess your progress.
Build an Emergency Fund
If you don’t have one already, a healthy emergency fund should be one of your top money must-haves. Without it, you are one burst pipe, failed engine, or surprise injury away from wiping out your other resolutions.
Aim for at least three months' expenses in your emergency fund. That will help you and your family manage most surprise costs without getting too far off track with your finances.
You can keep a standard savings account for your emergency fund, but a high-yield savings account, money market account, or certificate of deposit (CD) allows you to earn interest on your savings while keeping them accessible.
Paying Off Debt
Paying off debt is one of the best ways to free up your finances and focus on wealth-building goals. However, not all debt is created equal.
Start by prioritizing any high-interest debts, like credit cards or personal loans. Then, move on to debts with lower interest rates, like car loans, student loans, and mortgages.
Create a debt repayment plan each month to help you stay on top of payments. As you pay each one off, shift those payments to new debts.
Saving for Retirement
Adding just a little more to your monthly retirement savings can yield significant results later. Aim to max out your retirement accounts if you can, or make a plan to increase contributions.
This could also be a great time to assess your current retirement savings plan and see if you need to supplement it with additional accounts, like a traditional or Roth IRA.
Investing
Don’t forget to include your overall portfolio in your resolutions. Set some investment objectives, like diversifying your portfolio or increasing contributions where you can.
Also, set reminders to check in on your investments throughout the year and rebalance when necessary.
Home Ownership or Improvements
Consider your needs and wants for your home for the year ahead, and plan for them now.
For example, if you know you need to replace your roof, determine what you need to save to do so in the new year.
Or, if you plan to buy or sell, make a list of the steps you need to take – financial or otherwise – to make it happen, and set smaller goals throughout the year to support that objective.
Education Savings
Whether saving for yourself, a child, or a loved one, saving up for education is no small feat, the cost of higher education continues to climb, so it’s more important than ever to have a plan to pay for it.
Fortunately, some savings vehicles make planning for college or other education costs more manageable. Options like 529 plans and Coverdell education savings accounts (ESAs) help you save money and offer tax benefits, including tax-free earnings.
Budgeting
Creating a detailed budget that aligns with financial goals is paramount for achieving those goals. If you’re new to budgeting, start by tracking your income and expenses to see how you’re spending now. After a month or two of tracking, you can adjust your spending habits and make changes to accommodate your plans for the year.
Automating Savings
Setting up automatic transfers to savings and investment accounts is one of the best ways to hold yourself accountable for your goals. Once the transfers are set up, they require no extra effort, allowing you to stick to your resolutions with ease.
Monitoring Progress
Throughout the year, make time to check in and review your progress. Consistent reviews will help keep you motivated and ensure that you’re still on target to hit your goals.
If you need help, there are many financial apps and tools that can monitor your progress and alert you to changes or opportunities for improvement.
Adjusting Goals as Needed
A lot can happen in a year. Don't get discouraged if you have to adjust your goals halfway through the year. Goals are not meant to be set in stone; they’re just supposed to help guide you closer to where you want to be a year from now.
If your income, expenses, or life circumstances change, it’s okay for your objectives to change with them.
Don’t forget to celebrate your wins and find ways to reward yourself. Taking time to notice your achievements can help keep you motivated.
This is provided for informational purposes. The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. All investing involves risk including possible loss of principal. Past performance is no guarantee of future results.
This can be especially true for your financial goals. Surprise expenses, market instability, and economic challenges can wear down on your plans throughout the year. So, what can you do to ensure you progress all year, even when the unexpected happens?
The key is to create your financial goals for the year and then build out the systems that will support those goals. Even if you’ve fallen short on your resolutions year after year, this year can be different with the suitable systems in place. Here are some tasks and methods to help you stay on track:
Benefits of Financial Goal Setting
It is so important to take time to set intentional goals at the start of every year. It’s not just a fun tradition; it’s backed by science. Research shows that people who set specific goals are 43 percent more likely to achieve them. Additionally, of the people who set New Year’s resolutions, 59 percent said they kept all of them, and 28 percent said they kept some.That shows that even if you don’t achieve every goal you set, just having resolutions in place can help point you in the right direction and give you motivation and a sense of accomplishment to keep going.
Reviewing the Past Year’s Financial Performance
Knowing where you’re coming from is crucial before you can confidently move forward. Review your past year’s progress to understand what challenged you or helped you succeed.Assessing Financial Progress
Review the past year as a whole. How was your financial health? What goals did you achieve, and what setbacks or challenges did you face?
This assessment helps you determine where you are now and what’s already working well. You don’t have to reinvent the wheel; if something works for you, try to find ways to continue incorporating that strategy. Similarly, identify any areas that need improvement or methods that need to be given up because they don’t help you achieve your most important goals.
Learning from Mistakes
Some people shy away from digging into the numbers and finding where they slipped up or veered away from their money goals. But this is a key step that will help you make better decisions in the future.
It’s not about beating yourself up for the things that went wrong. It’s an opportunity to find where you struggle and put strategies into place that will help you avoid those pitfalls in the future.
Celebrating Successes
Take a moment to celebrate the financial milestones and achievements of the past year. It’s easy to get distracted by what went wrong, but making a point to recognize what went right will help you stay the course and build confidence in your ability to pursue your goals.
Setting SMART Financial Goals
The SMART goal method is a system that helps you set better, more attainable goals. SMART goals are Specific, Measurable, Achievable, Relevant, and Time-bound.Specific:
One of the most common financial resolutions is “save more money.” But an objective like that is doomed to fail because it’s too broad. Try to get specific about what you want to achieve. Instead of saving more money, aim to save a certain amount in your retirement account or create an emergency fund that covers three months of expenses.
Measurable
Nebulous money goals can feel so out of reach that they can discourage you from trying to achieve them.
But once they’re measurable, it’s easier to see how to tackle them gradually.
If you want to pay off your student loans, saying, “I want to pay off $10,000 in student loan debt” is not enough. Dig deeper and think about the habits that will get you there. Create a budget to free up some money to put toward that debt, and set up automatic transfers to help you stay consistent. Those bite-size tasks can make a significant impact over a year.
Achievable
The foundation of success is built on your everyday habits. Sometimes, you must start with smaller, more achievable habits before conquering the loftier ones.
The right goal for you is probably something that’s a little bit challenging. It's doable, but it requires you to stay consistent and learn new habits. Try focusing on one area of your finances first and adding more goals as you see progress with your habits and systems.
Relevant
With everyone sharing their plans for the new year, it can be easy to follow other people’s resolutions or wonder if yours are enough.
The goals you set for yourself need to align with your personal vision of success and values. Try not to stay focused on what others are doing, because their vision might not be right for you.
Time-Bound
Some goals you can check off your list in a month; others will take years. Knowing the time commitment for each will help you understand if you’re still on track throughout the year.
Saving up for a spring break vacation is a short-term goal that’s easier to plan for.
However, for the goals that will take longer to achieve, try breaking them down into smaller parts. If you want to save up $100,000 for a down payment on a home, focus only on what you can realistically save up in one year. At the start of the following year, assess where you are and set a new goal amount accordingly.
Giving yourself deadlines will help keep you on track and give you a guidepost to assess your progress.
Common Financial Goals for the New Year
Do you need some fresh financial goals for the year ahead? Here are some great ones that can help you improve your financial situation this year:Build an Emergency Fund
If you don’t have one already, a healthy emergency fund should be one of your top money must-haves. Without it, you are one burst pipe, failed engine, or surprise injury away from wiping out your other resolutions.
Aim for at least three months' expenses in your emergency fund. That will help you and your family manage most surprise costs without getting too far off track with your finances.
You can keep a standard savings account for your emergency fund, but a high-yield savings account, money market account, or certificate of deposit (CD) allows you to earn interest on your savings while keeping them accessible.
Paying Off Debt
Paying off debt is one of the best ways to free up your finances and focus on wealth-building goals. However, not all debt is created equal.
Start by prioritizing any high-interest debts, like credit cards or personal loans. Then, move on to debts with lower interest rates, like car loans, student loans, and mortgages.
Create a debt repayment plan each month to help you stay on top of payments. As you pay each one off, shift those payments to new debts.
Saving for Retirement
Adding just a little more to your monthly retirement savings can yield significant results later. Aim to max out your retirement accounts if you can, or make a plan to increase contributions.
This could also be a great time to assess your current retirement savings plan and see if you need to supplement it with additional accounts, like a traditional or Roth IRA.
Investing
Don’t forget to include your overall portfolio in your resolutions. Set some investment objectives, like diversifying your portfolio or increasing contributions where you can.
Also, set reminders to check in on your investments throughout the year and rebalance when necessary.
Home Ownership or Improvements
Consider your needs and wants for your home for the year ahead, and plan for them now.
For example, if you know you need to replace your roof, determine what you need to save to do so in the new year.
Or, if you plan to buy or sell, make a list of the steps you need to take – financial or otherwise – to make it happen, and set smaller goals throughout the year to support that objective.
Education Savings
Whether saving for yourself, a child, or a loved one, saving up for education is no small feat, the cost of higher education continues to climb, so it’s more important than ever to have a plan to pay for it.
Fortunately, some savings vehicles make planning for college or other education costs more manageable. Options like 529 plans and Coverdell education savings accounts (ESAs) help you save money and offer tax benefits, including tax-free earnings.
Creating a Financial Plan to Achieve Goals
Resolutions are just the first part of the puzzle. Once you know where you want to end up, it’s time to create a plan to get there.Budgeting
Creating a detailed budget that aligns with financial goals is paramount for achieving those goals. If you’re new to budgeting, start by tracking your income and expenses to see how you’re spending now. After a month or two of tracking, you can adjust your spending habits and make changes to accommodate your plans for the year.
Automating Savings
Setting up automatic transfers to savings and investment accounts is one of the best ways to hold yourself accountable for your goals. Once the transfers are set up, they require no extra effort, allowing you to stick to your resolutions with ease.
Monitoring Progress
Throughout the year, make time to check in and review your progress. Consistent reviews will help keep you motivated and ensure that you’re still on target to hit your goals.
If you need help, there are many financial apps and tools that can monitor your progress and alert you to changes or opportunities for improvement.
Adjusting Goals as Needed
A lot can happen in a year. Don't get discouraged if you have to adjust your goals halfway through the year. Goals are not meant to be set in stone; they’re just supposed to help guide you closer to where you want to be a year from now.
If your income, expenses, or life circumstances change, it’s okay for your objectives to change with them.
Staying Motivated Throughout the Year
Research shows that people who write down their goals, visualize them, and enlist an accountability partner are up to 75 percent more likely to be successful. Creating a vision board or keeping visible reminders of your financial goals around can help you remember – at a glance – what you’re working toward. You can also enlist the help of a trusted family member or friend to help keep you accountable.Don’t forget to celebrate your wins and find ways to reward yourself. Taking time to notice your achievements can help keep you motivated.
Conclusion: A Successful Financial Year Ahead
Meaningful progress begins with vision and intention. A brand new year is about to begin; take this opportunity to set your goals and plan out the steps you’ll need to take to achieve them.This is provided for informational purposes. The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. All investing involves risk including possible loss of principal. Past performance is no guarantee of future results.