Setting up a financial plan of attack for 2021
When it comes to new year resolutions, the most valuable could be to resolve to be more financially secure. Perhaps the best way to make this resolution stick is to establish one or two simple 2021 financial goals.
Financial goals are different for everyone. A lot is determined by your stage of life and your family’s needs. But it’s always good to take some time to consider how your financial needs have changed or evolved over the past year, and determine new ways to achieve your goals. A new year is the best time to establish a new plan.
How to set your financial goals
The best thing about financial goal-setting is that it gives you the motivation to put these goals in motion and a strategy to bring them to fruition. Without goals, we all tend to wander around in circles, putting off until tomorrow what we can achieve today — or at least what we can achieve in 2021.
Hopefully, the financial planning you put into place for 2021 will also work to serve you long-term on your road to financial independence. But, it’s important to establish some doable, bite-size goals for just the next twelve months. This way, when 2022 rolls around, you can puff up with pride and say, “I made a difference this year,” and be enthusiastic to continue into the future.
Financial goals can be categorized into three groups: savings, investments, and spending interests.
Short-term financial goals can include saving for a vacation, saving for retirement, paying off a credit card or debt, buying a new appliance, or updating a kitchen.
This could be the year that you:
• plan a budget and stick with it
• make a strategy to pay off your student loan
• open a 401(k) or Roth IRA retirement account and contribute to it steadily
• save for a down payment on the car of your dreams
• say goodbye to credit card bills and boost your credit score
• faithfully contribute to an emergency fund that will give you valuable peace of mind.
With a simple plan in place, and a dollar amount in mind to contribute weekly or monthly, you can reach your goal by year’s end.
Establishing clear goals makes it so much easier when you’re faced with decisions about spending your money. For instance, knowing that you want to save money for a new car makes it easier to spend less on take-out food or a new pair of shoes. In fact, you might want to put a stickie note on your steering wheel that says “New car? Or a latte?” to remind you to get out of that drive-through line. Put a photo of the new refrigerator you’re saving for on the door of your old fridge. It could inspire you to find something inside to make for dinner rather than having take-out delivered.
Simple first steps to meet your financial goals
- The first step is to determine your goals, make them clear, and put them in writing before they slip away. Remember to make goals that truly matter to you, not what you think looks good to others. Generic goals are too easy to neglect.
- The next step is creating a budget that reflects the goals you have in mind. Everyone needs a budget. It’s how we get a clear picture of what we’re spending each month and how we can seal up the cracks where money is being wasted. You can go through your bank statements and bills to assemble a spreadsheet of expenses, or you can try a free budgeting program such as Mint to simplify the process.
- It’s never easy to find extra money to put toward your goal, but your budget may reveal where you can find some by restructuring your spending habits. Every goal must have a process with which you can achieve it. Basically, this comes down to spend less, earn more, or a little of both. Consider consolidating credit card bills to spend less on interest rates. Open your mind to ways to bring in more money — a part-time job, a freelance project, selling stuff you no longer use.
- Create a reward system for motivation. Making sacrifices to reach your goals can often lead to burnout for the cause. For each week or month that you stick to your plan, anticipate a little reward — one trip to Starbucks for a Venti, a steak dinner at home, or a lunch out with friends. Don’t be above creating a calendar for your budget, complete with gold stars for achievement.
- Talk to someone you admire, including family members, about the goals you’re setting and why they are important to you. Just like any other goal, you may need some occasional support or encouragement to stick to your plan. They can also be important cheerleaders as you achieve milestones.
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References accessed on January 4, 2021:
https://www.investopedia.com/articles/pf/06/newyear.asp
https://www.clevergirlfinance.com/blog/examples-of-financial-goals/
https://www.moneyunder30.com/financial-new-years-resolutions
https://money.usnews.com/money/personal-finance/saving-and-budgeting/slideshows/financial-new-years-resolutions
https://mint.intuit.com/
