If it’s common that your New Year’s resolutions rarely last until Valentine’s Day, this might be the year to stop the cycle, and to start setting goals.
What’s the difference?
“I’m going to be healthier” is a common resolution. It begs the question, “How?” Folks who can’t answer that question usually get frustrated and abandon their resolutions before they start.
On the other hand, “I’m going to jog one mile three days every week” is a goal. You can track it on a calendar. You might even start measuring it by recording your times and noting improvement. And if you hit your three days of weekly jogging goal, the end result? You’ll be healthier!
Your financial goals for the New Year are no different. This four-step process will help you track and celebrate your progress towards a prosperous 2020.
1. Set your priorities.
“I want to save more” is one of those financial goals that sounds better than it really is. It’s not specific or actionable enough.
Drill down a little deeper, and you’ll come to a question: “What do you want to save FOR?”
Make a list of your saving goals for the year ahead, such as:
- Home upgrade
- New car
- Max retirement account contributions
- Kids’ college fund
- Family vacation
Now, rank those goals in a way that’s meaningful to you. If you have a house full of teenagers, you might want to measure your monthly savings towards college. If you’re turning 60 this year, ramping up your IRA catch-up contributions might be the priority.
Finally, be realistic about what you can accomplish and what will make you feel satisfied at the end of the year. Talk to your financial advisor about whether it will be more effective to spread your savings across 5 or 6 goals, or to really focus on 1 or 2 top priorities.
2. Personalize your goals.
Things matter more to us when they are personalized and fun. Anyone can go on a “Family Vacation.” But “The Jones Family Theme Park World Tour” is a goal that you’ll be more excited to save for. A well-named goal will create a picture in your mind that you’ll look forward to realizing.
For a little extra personalization, many banks now let you name your accounts anything you want, right from their apps or online portals.
“Savings Account 2?” Yawn.
“Backyard Swimming Pool Fund?” That’s an account you’ll be happier swiping to every month.
3. Automate and track your progress.
You’re probably already making automatic contributions into IRA and 401(k) accounts. It’s easy to set up automatic saving contributions as well. If you pay yourself first as soon as you have your paycheck, your savings goals aren’t going to get lost in the bustle of balancing your monthly budget against extra spending.
Tracking your progress can be automated via any number of banking and personal finance apps. But personalizing this process can be rewarding as well. Watching your numbers grow in a spreadsheet you update or a favorite notebook can really add to your sense of accomplishment and keep you motivated.
4. Celebrate along the way.
It might be twelve months before your “Eliminate credit card debt” goal is realized. But once you pass your “Pay off holiday debt” milestone, treat your spouse to a nice dinner.
Have you made your planned savings contributions on time for 3 months? Play an extra round of golf this weekend.
Halfway to your “Carefree Retirement Where I Can Do Anything I Want” savings account goal? Take a weekend trip to that lakeside town where you’re thinking about retiring.
(See? Sounds more fun than Extra Savings Account, right?)
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