At the top of the year, you need specific financial goals to help you plan out the next 12 months. Some people refer to this annual practice as their new year’s resolution. This is where you list down goals and targets you have for the year. Normally, health and weight loss are at the top of the list for most people. Simply because people are coming off the holidays where parties and get together meant food and weight gain.
The holidays also meant that your finances could have been stretched more than you have planned. It is one of the most festive and expensive times of the year. CNBC shares that consumers were looking to spend almost $1,000 on gifts and holiday expenses. This is one of the reasons why people also include their finances in their financial resolutions.
But when you do, remember that you need specific financial goals to go with your list. There is a reason why a lot of people can’t seem to stick to their goals. They write down their goals and start off with so much enthusiasm as they cross out items in their list. However, some people fizzle out and fall off the wagon in just a few months.
Some would be quick to point out that these people are just not that determined to get to their goals. They lack the willpower and discipline to push on and see their plan up until the ned. But a big part of the problem could be in the way you structure your new year’s resolution especially when it comes to financial targets. Here are a few tips to help you achieve your goals for the year.
I will create a household budget
One of the most important financial decisions you can make is to put together a household budget. You might think that since everyone else is doing it, it should be a walk in the part. But if you want to have a comprehensive budget, you need to put a lot of work into it. You cannot simply copy what other people are doing and hope that the format works for you.
Specific financial goals apply to your budget as well. It is easy to list down your plan of having a budget but what comes after that? Keep in mind that the simpler your budget is, the easier it can be for you to stay on top of it. But just because it is simple does not mean you do not put in the work to put it together. It needs to be as comprehensive as possible.
You have to list down your income as well as expenses to have an idea of where you are with your finances. Only then will you be able to determine the adjustments you need to make. It is also important to find a way to stick to your budget. You can have a copy of it on your phone or an actual paper in your wallet you can carry with you all the time. The point is to have access to it anytime you need it to help you stay on track.
I will spend less
This is one of the best decisions you can ever make at the start of the year. But you also need to set specific financial goals when it comes to lower spending. This is still vague and only describes a desire. A concrete action plan can make this a reality and produce results. A good place to start is with your household budget.
Take a look at your expenses and identify areas you can cut down. You can even consider taking on a frugal lifestyle. This is where you try to live below your means and spend less than what you have budgeted for. If you are spending a lot on food with several take out meals in a week, consider preparing and cooking your own meals at home. You can also cut out your cable since you really do not need hundreds of channels with only a few hours a day to watch tv.
One other thing you need to plan for is what to do with the savings you get to set aside every month. It is easy to lose track and impulsively use it for your wants if you do not have a plan for it. Are you going to use it to aggressively pay down debt? Or are you going to put it aside to max out your 410k at work? Have a plan for what to do with the money so you do not use it anywhere else.
I will pay down debt
Specific financial goals give you direction especially when you have vague plans. It is great that you want to pay down your debt but how will you do it? Normally, you start with a list of all your debt obligations from your mortgage payment to car loan and even your credit card debt. This list will help you identify how to move forward.
You need a repayment strategy when you start to pay down your debt. Are you going to focus on high-interest accounts as Experian shares or pay down the smallest account first? One can help you save money in the future while the other gives you mental wins you can carry over to paying off other debt accounts. One other option is to consider debt consolidation.
As the name suggests, you combine your debt payments under one account. Much like putting all credit card debt under one lender. This works if you get to take advantage of a 0% rate credit card. If your credit score has significantly improved over the years, you could also qualify for a lower rate. It is a good idea to pay down your debt but you need a concrete plan on how you will approach it.
I will save for retirement
Retirement will come to you whether you like it or not. The question now is do you prepare for it or will you let it creep up to you without any money saved up? There are even times where it happens sooner than you expected. This is not ideal because if you do not have the savings to support an early retirement, there is a good chance you will run out of money.
Once you decide that this will be a priority for you this year, the first thing you need is to determine your target retirement age. When do you want to retire? Once you have that figured out, the next step is to plan what your retirement will be like. What do you want to do in retirement? Are you going to travel, move to the beach, or even stay in your community and volunteer your time?
These details are crucial so you can plan how you need to save for your retirement. What you want to do in retirement will give you an idea of how much you need. Your retirement age will give you a deadline when you need to have that money. This is a good way to start planning for your retirement and this is how it should start out.
Importance of specific financial goals
If you want to bounce back this year, it is important to have specific financial goals at the start of the year. Doing so guides you better towards your financial goals. It also helps you get back on track faster if you ever lose your way.