It’s the New Year, and for many people, that means evaluating their habits working toward making positive life changes. In some cases, this is the result of a New Year’s resolution. Others prefer to avoid the “resolution” trend and simply do some goal setting. Whatever you’ve chosen to do, there’s something invigorating about choosing to take the necessary steps to make some positive changes and setting short and long-term goals.
For lots of people, these goals are at least partly centered on their financial lives. Our finances play a large part in the way we identify who we are, and our goals tend to revolve around whether or not our finances can support them. For example, if your goal is to travel more in the upcoming year, you’ll need to find a way to finance your adventures. Or maybe your goal is to eat better and exercise, so you need to find room in your budget for a healthy meal delivery service and a gym membership.
Whatever your goals are, and however your finances connect to them, it’s important to take a measured approach to your resolutions to ensure you don’t fall off the bandwagon.
Set SMART Goals Intentionally
One reason many people don’t follow through with their New Year’s resolutions is because they aren’t set with intention. “Get healthy” or “Start budgeting” aren’t very specific goals, and because they’re too general and not necessarily meaningful to your day-to-day – you’re more likely to give up on them before they come to fruition.
To avoid this, you want to set goals intentionally. The easiest way to do this is to ask yourself, “Why is this important to me?” and “How will this positively impact my life?” If you want to start budgeting, that’s great! But there will be times when it’s incredibly difficult to stick to your budget, and you may be tempted to let it go after a few months and return to old habits. Ultimately, by setting intentional goals, you go about achieving them in a smarter way. Many people recommend following the SMART goal setting routine:
S – Specific
Target a specific area for improvement
M – Measurable
Quantify or at least suggest an indicator of progress
A – Assignable
Specify who will do it
R – Realistic
State what results can realistically be achieved, given available resources
T – Time-related
Specify when the result(s) can be achieved
Setting SMART goals will help you stick to an action plan and stay motivated when working toward achieving new financial habits.
Next, you’ll need to examine why you’re setting these SMART goals in the first place. It may be because you’re tired of running out of money each month. Maybe it’s because you’d like to save more and spend more on things you actually enjoy (like events with friends or travel) rather than things you don’t enjoy or need (like a too-high cable bill, or another sweater that will gather dust in your closet).
Then, ask yourself how budgeting will positively impact your life. If you budget well, you may be able to do more of what you love. You may also be able to start saving for some long-term goals, like buying a house or paying off your student loans. Imagine how it will feel to not be overwhelmed by paying bills anymore, because you already know the money is there to complete payments. That alone is a huge positive impact!
Create a Plan
Once you set your financial goals and fuel them with intention, you’re ready for the next step: creating a plan. It’s often said that people who fail to plan, plan to fail. This is another reason many New Year’s resolutions go unachieved – people have no action plan to help them achieve their goals!
Take your financial resolutions and decide exactly how you’ll work toward them. Make sure these actionable steps you map out are achievable. Sticking with our budgeting example, you probably won’t be able to perfectly stick to a budget right away and completely eliminate spending in some categories. You may create many smaller goals in your action plan, like this:
- Hunt for a more affordable apartment or house to spend less on a rent/mortgage.
- Cut excess spending (like a cable bill or extravagant dinners out with friends) and replace with more affordable options (like a streaming service or a potluck dinner with friends that you host at your apartment).
- Start saving a small percentage of your income to build an emergency fund. Add an extra $50 a month to this amount when you underspend in other budget categories.
- Organize a list of all your debts (student loans or credit card debt) and commit to paying more than the minimum on the one with the highest interest until it’s paid off.
- Create weekly meal plans to cut down on grocery spending and ensure you eat in more.
All of these are reasonable steps you can easily take that will move you toward your ultimate goal of sticking to a budget this year.
Ask For Help
The most important thing to remember is that you’re not alone. There will be times that organizing your financial life and sticking to your goals is daunting and difficult. When that happens, feel free to reach out to the Wealth Habits team. We’d love to help you create an action plan and stay on track to achieve your financial resolutions this year!