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Learn How to Develop Financial Goals in the New Year
Many of us commit to making changes in the New Year related to our eating habits, exercise, live a stress-free life, get more rest, get control of our money, and the list goes on. Achieving personal financial independence is always foremost on most people’s New Year’s resolution.
Many people desire to achieve financial independence but do not know where to start.
What is a Financial Goal?
Financial goals are the plans and goals you set on how you want to spend and save your money. Financial goals are not the same for everyone because people have different priorities. It is important that you set a financial goal to better keep a track of where you spend your money.
What is a Financial Goal Example?
Everyone’s priorities are different, so are everyone’s financial goals. For some it is how to:
- Get out of debt
- Save for retirement
- Save for down payment on a home
- Purchase a car
Setting up a financial goal will help you assess where you are today and where you plan to be in the future. It will also get you in the habit of saving money.
What are the Different Types of Financial Goals
Setting up a financial goal is the first step towards your financial dream. Identify if the goal is a short-term or long-term goal.
- A short-term goal can be achieved in a short period of time. Short term goal can be saving money for a minor home improvement or saving to purchase home furniture.
- A long-term goal is a goal that takes more than five years to realize. A long-term financial goal can be saving for retirement.
Here a few steps to set up a Financial Goal
1. Create a Plan
Financial goals should be flexible because it can change from time to time depending on your life changes and situations.
Financial goals should be specific.
If you want to take a family trip to Paris in two years, research and find out the estimated cost. For example, if the cost is estimated at $8,000, this will mean saving $4,000 per year or $333.33 per month. Create a plan to help you save money.
Our needs are many but are resources to satisfy those needs are limited. We have bills to pay, save for retirement, save for college, buy birthday and Christmas gifts, Gofundme requests, etc. If we fail to prioritize, we will not accomplish our goals.
If you are serious about your goal, share them with family and friends and ask for their support to reach that goal. Telling your family about your plan can motivate you to stick to the plan of achieving your goals. Your family and friends can be a support system to help keep you on track to reach your goal.
4. Track your progress
If you are saving for a trip or paying off debt, track your progress to see how much you have saved. If it is paying off debt, see how much your balance goes down and that is a good motivation for you to keep moving forward until you achieve your goal.
Take control of your money in 2019 with these 7 financial goals.
7 Financial Goals for the New Year
Financial Goal #1: Set a Budget
To achieve financial success, you must set a budget. Assess your income and expenses and establish a budget. A budget will help you account for every penny you receive and spend.
Related posts: What is a 50 20 30 Budget Rule
Financial Goal #2: Build an Emergency Fund
We all have emergencies that arise every now and then. If we don’t plan for an emergency, we may fall deeper into debt because we resort to using credit cards. The first step to financial stability is to build an emergency fund. An emergency fund will keep you away from using your credit card and getting into debt.
Related posts: Emergency Fund
Financial Goal #3: Reduce your expenses
When setting up your budget, you will notice where your money is spent. This is a good time to find ways to cut down on your expenses. You may notice that you are spending a great deal on eating out, try to cut down on the number of times you eat out.
Your emergency fund should be about 2 to 3 months of your monthly expenses in the event you are unable to work. If you don’t have one, start one now.
Related posts: How to save money when you are living paycheck to paycheck
Financial Goal #4: Pay off debt
Getting out of debt is the best thing you can do for yourself and your finances. Short-term debts like credit cards are very expensive debt. Prioritize paying off short-term debts as soon as you can before saving money. For example, if you are making 15% return on your investment but paying 22% interest rate on your credit card, you are losing money. You should set up goals to pay off your debt by
- Setting up a payment plan to pay off debt
- Reducing your expenses
- Selling things you no longer use
- Getting a second job or get extra side hustle
Financial Goal #5: Read books on personal finance
Learn about managing your money. There are so many resources online, reading a book, or listening to a podcast will increase your personal finance knowledge. Set a goal to read at least one book a quarter or at least two a year. If you don’t want to read, listen to a podcast. You can subscribe to receive posts from this website.
Related posts: 5 Must read personal finance books
Financial Goal #6: Start Saving
Saving money is an important part of reaching your financial goal. Save money in addition to your retirement contribution. If you don’t think you have any money to save, consider cutting back on your expenses,
- Cut down your grocery bill
- Cut cable
- Find ways to save on utilities
Related posts: 30 Simple ways to save money
Financial Goal #7: Plan for retirement
Prepare and plan for retirement. There are online calculators to use to determine how much money you will need in retirement. The New Year is a good time to review where you are and determine your next step.