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How to Set Practical Financial Goals for the New Year

Your financial well-being can majorly impact your stress levels and personal and professional satisfaction. Taking control of your finances, such as increasing savings or paying down debt, can be overwhelming when determining where to start. Learn more about how to set practical financial goals for the new year:

Avoid “All or Nothing” Thinking

The main reason why people aren’t successful at achieving their goals, especially financial ones, is because they are overly ambitious when setting them. Avoid “all or nothing” thinking – focus on being realistic and consistent above all else, even if it means it isn’t as seemingly impressive of an achievement. Saving $50 a month toward debt is much better than going for $500 and struggling, then losing faith and eventually giving up.

Brainstorm and Prioritize

Get started in your goal-setting process by not overthinking – simply brainstorm and think of all the short and long-term financial goals you would eventually like to accomplish. Once you have them all listed, prioritize them so you can focus your decision-making and efforts accordingly.

Determine Your Overall Budget

Figure out how much money you must spend on your financial goals. Compile your regular bills and track your other discretionary spending to determine your overall budget for the amount you will have available to put toward your initiatives. This can give you a starting point on what goals can be realistically pursued within your budget.

Develop an Action Plan

Once you know what overall goals you want to prioritize and how much money you can devote to pursuing them, develop an action plan. Start small and narrow down achievable steps you can take to make progress toward them regularly. Consistency is the most crucial factor in making your goals happen. Focus on habits you can easily stick to, such as automatically transferring a set percentage of your paycheck into savings or limiting how often you eat out.

Account for the Unexpected

Working toward your financial goals is exciting, so it can be tempting to devote as much of your financial resources as possible toward them. However, you need to also account for the unexpected situations that may arise, such as car repairs or medical bills, so they don’t derail your financial goals. No matter what your specific goals are, it is crucial to have emergency savings on hand to cover expenses that pop up, so be sure to include that into your overall plan too.

Consider Your Motivation

Setting financial goals is the exciting part where you are likely at peak motivation. Unfortunately, that is unlikely to last as the day-to-day sacrifices, occasional hardships, and overall impatience kick in. To stay on track, it’s crucial to consider your motivation – build steps to your plan that will give you small psychological wins, such as paying off a small debt or rewards for reaching milestones.

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