We all want better finances. Indeed, it’s not surprising that some of the most popular resolutions each year have to do with money.
As you consider your (recently failed) resolutions, don’t get discouraged. You don’t have to wait until next year to set new financial goals. Here are 3 goal setting strategies you can use to take your finances to the next level:
1. Make Them SMART
One of the best things you can do is write out a plan. As you create your plan, keep in mind the acronym SMART:
- Specific: Many people are vague about their goals. They say they want to “save more” or “pay down debt,” but they don’t have a specific amount in mind. Think about what you can do, specifically, with your goal. Say you’re going to “save $1,000 for a family vacation” or “pay off $3,000 in credit card debt.”
- Measurable: Next, make sure your goal is measurable. The good news is that if you’re specific about your goal, you can usually measure. You need to see how far you’ve come, and be able to tell that you’re making progress.
- Achievable: How realistic is your goal? Let’s say you want to max our your IRA contributions this year. You’ll need to set aside about $458 a month to do this. If you currently set aside $100, coming up with that $358 each month isn’t realistic. Instead, your goal should be to step up your retirement savings. Each month, you can find an extra $29.83 in your budget, and add it to the amount. So, for the first month, you contribute $129.83. The next month, you contribute $159.66. The idea is to keep stepping up your contributions in an achievable way so that by the end of the year, you have worked up to maxing out your contribution — and you can maintain that level.
- Relevant: Does your goal matter to you? Make sure you choose a goal that you care about and that is relevant to your life. Your goal should be important and match with your priorities.
- Time-bound: Finally, put a realistic time limit on your goal. You can work on the goal for a year, or you can even work on it for two or three years, depending on how big it is. As long as your timeframe is realistic (don’t try to pay off $30,000 of debt in six months), you can create a plan that breaks down your goal into time-bound steps.
This is one of the best goal setting strategies for those who like to have a game plan, and who prefer a road map when it comes to their finances.
2. Set One Big Goal and Break It Down
I like to set one big goal and break it down so that I can work on it until I’m done. The beauty of this process is that you don’t necessarily have to set a goal each year. Instead, you consider your priorities and figure out the most important item on that list. What item in your financial life needs the most work right now? Whether it’s savings, investing, business, buying a house, or debt pay down, think about the most pressing money matter you have right now and focus on that.
My retirement is where it needs to be, so there isn’t much reason for me to boost it. I’m just fine with my student loans, so I don’t worry about paying them down. What I am concerned about, however, is what’s next for my home business. So this year main money goal is diversifying my revenue sources.
Narrowing your focus can help you reform the most important aspect of your finances. I don’t really need to set out a specific plan for my goal; it’s just something that I work on a bit at a time.
This strategy, and similar goal setting strategies, are ideal for those who are ready to move to “big picture” goals because they have already laid the groundwork for a solid financial future.
3. Start NOW
One of the biggest problems with achieving your goals is procrastination. Too often, we think that once we’ve “failed” we have to be done until the following year. If you want to be successful with your financial goals, and continue to make progress, you need to get out of this mindset.
Instead, realize that you can start now. And if you get off track, you can start again. RIGHT NOW. Rather than limiting yourself, open yourself to the idea that you can always start a new financial goal, and that you can always get back on track.
Figure out a strategy that works for you, and if you find yourself falling behind, tweak your goal and your strategy. Consider likely goal setting strategies, and pick something that works for you.
As long as you are making progress, you are a success.