Many people create a resolution for the new year. Although common resolutions include education, relationships, long-term goals, or traveling, these resolutions can be about anything. One of the most popular goals is to work on one’s physical fitness. Just as your physical health is important, your financial health determines how comfortable you are with money and will influence you the rest of your life.
These money goals could be about starting an emergency fund, boosting your credit score, or increasing the balance in your savings account. If none of those spark your interest, you may choose to open a credit card to build credit, pay off some of your student loans, or buy a financial planner.
Regardless of the personal finance category you choose to tackle, every forward step helps create the best financial plan to reach your goals. If you are having a hard time deciding which financial goal you want to master, take the quiz below to help you choose which financial resolution you should incorporate in the new year.
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Now that you have your financial goal picked out and ready to implement, you will need to hold yourself accountable for completing these goals. There’s nothing worse than a New Year’s resolution that fizzles out like the fireworks on New Year’s Eve. With that in mind, you should strive to meet and exceed your financial goal. Here is some advice to help keep you on the right track all year.
1. Create SMART goals
To create an efficient goal, use the following acronym: SMART. The S stands for Specific. This means that your goal should be clear and well-defined. Next, the M is for Measurable. There needs to be a number or benchmark that you can use to assess your progress.
The letter A represents Achievable (sometimes seen as Attainable), meaning you should consider any limitations or obstacles hindering you. You should conduct a reality check to see if the goal is physically capable of being accomplished.
Relevant holds the place of the R. Your goals should be something that you have a connection to. They should be centered on milestones that you are interested in reaching. The final letter stands for Time-based (also seen as timely). This aspect of a SMART goal is about setting and meeting deadlines.
SMART goals can help you be more efficient and effective at reaching your stated goal. When goals are not created using the SMART format, it is obvious. If your existing goal is to “pay off debt”, an outsider won’t know which debt, when, how, and why. An example of a financial SMART goal looks like this: “For the next 12 months, I will apply $150 of my monthly paycheck to fully pay off my $1800 credit card debt.” It is specific, measurable, achievable, relevant, and time-based, which minimizes the chances of it fizzling out.
2. Check your budget
If you haven’t thought about how you spend your money, you need to create a budget. Once you have your budget, you should try to keep it on track. It’s easy to go over your stated budget amount. If you constantly seem to be spending over your limits, consider reallocating your budget categories. Really focus on which categories consistently go over budget. You should try to cut out any unnecessary expenses.
You should also need to rework your numbers when you have excess. If you have a lot of money leftover at the end of each month, you should add that extra cash to a rainy day fund or put it directly in your savings account. Having a correct budget will help you maintain your financial goals.
3. Prioritize your financial resolution
If you put your financial resolution in the back of your mind, you will treat it as a last priority in real life. You should write down your goals, and place them somewhere where you will see them everyday, such as on your mirror or fridge. Make a conscious effort to work on your goal everyday if you can.
You should isolate the reason why you are creating this financial resolution. Is it to be able to afford better health care, generate a stronger credit report, or just lead a better financial life? Whatever the reason, when you know your “why”, you have less chance of not fulfilling this goal.
4. Be flexible to the unknown
Your financial New Year’s resolution could take an entire year to complete. During that time, a number of financial emergencies could happen. You could be subject to paying for vehicle repair or medical expenses.
When you are creating your financial goal, it is important to expect the unexpected. You should have already planned for some unknown expenses at the origin of this resolution. The expenses should not hinder your financial goal, but rather, add a cushion in case of an emergency.
5. Ask for an accountability partner
Most of the time, friends and family are happy that you are choosing to better yourself. Whether it be physically or financially, having a friend or family member to support you in your journey is beneficial. In regards to your financial resolution, ask them to hold you accountable until you are able to manage this goal on your own.
Often, it is a lot harder to default on your goal when there are two people involved. This means that you have a better chance of paying your bills when there is someone else encouraging you. Most times if you don’t fulfill the goal, you are letting yourself and your supporter down. If you don’t have a trusted family member to help you, consider consulting a person who works with financial advisory services. They may be the professional help you need to get on track.
Now that you are familiar with the steps to hold yourself accountable for your financial plan, you can begin to push your financial health towards the best that it can be. Use the financial resolution that you got from the quiz above, or create your own. Try different money-saving techniques like always paying with dollar bills and saving the change or participating in a spending fast. With your new financial knowledge, the possibilities are endless. Just keep pushing yourself to the best that you can be.
