By Tracy Scott
New Year’s resolutions with financial goals can be overwhelming. It’s understandable. Giving yourself 12 months to eliminate a substantial debt or save for a down payment on a new home can feel unachievable, even before you apply your first $1 toward the goal.
But, there’s no need to stress. Some money goals can be achieved in 12 months, while others may take longer. Abandon all-or-nothing thinking and embrace an alternative way to accomplish your financial New Year’s resolutions.
Start by setting monthly or weekly milestones on the path to goal achievement. For example, if you resolve to pay off a $6,000 personal loan, don’t focus on the $6,000. Instead, let a monthly goal to pay $550 (or another amount) be your target. If you break your goal into manageable bites and adopt a few more goal-setting best practices, you might be happily tossing confetti well before the stroke of midnight on December 31.
Let’s follow Meredith Money as she defines her alternative New Year’s resolution.
Meredith Money starts with a typical New Year’s resolution.
“I want to get out of debt as soon as possible”.
Goal Setting Best Practice #1: Get Specific
Meredith has a general idea of what she wants to accomplish and when, but her resolution is lacking specificity. She needs to clarify her financial goal to help identify the actions she must take to achieve it. If Meredith makes the goal more concrete, she can break it into measurable milestones. These shorter checkpoints can guide her to the next step she needs to take to achieve the goal.
Questions that can help make a goal more specific include:
- Which debt should I focus on first?
- What is the total debt?
- How can I make this happen?
Meredith Money follows our advice and revises her original resolution to be more specific.
“I want to pay off $5,000 in credit card debt. I can pay $300 a month toward this goal by working a part-time job.”
Goal Setting Best Practice #2: Develop a Timeline
Without a time frame, Meredith’s goal will have a tough time gaining traction. Non-existent or vague timetables leave most goals dead in the water. She can solve this problem by setting a firm start and end date to her goal. As she builds on her measurable successes, a natural momentum emerges that she can use to push through challenges she might experience along the way.
Questions that can help identify a financial goal timeline include:
- Based on the effort I can put into this goal, how long would it take to achieve?
- When could I realistically take the first action to achieve this goal?
- What is my deadline for reaching this goal?
Meredith Money adds a timeline to her resolution.
“To eliminate my credit card debt of $5,000, I will work an extra part-time job. With the additional income, I will pay $300 a month toward my debt. I will send the first payment of $300 on February 15 of this year and make my last payment on June 15 of next year.”
Goal Setting Best Practice #3: Find an Accountability Partner
Sticking to a financial goal that takes more than a few weeks to accomplish is easier when you have support. Solidify your success by identifying another person that you can share your goal with and who will encourage your efforts. This individual can talk you down from engaging in an activity that will delay your goal, such as making additional charges on the credit card you’re trying to pay off. An accountability partner also celebrates your successes along the way, like enjoying a budget-friendly night out when you reach your goal’s half-way mark.
An ideal accountability partner is someone who:
- Shows discipline.
- Has the time to assist you with your goals.
- You don’t want to disappoint.
Meredith Money enlists her sister to help her stick to her alternative resolution.
“To eliminate my credit card debt of $5,000, I will work an extra part-time job. With the additional income, I will pay $300 a month toward my debt. I will send the first payment of $300 on February 15 of this year and make my last payment on June 15 of next year. I will send a copy of each new credit card statement to my sister so she can see that I’m making the $300 payment each month and not incurring any new credit card charges.”
Follow Meredith’s lead and change the way you think about financial resolutions. Your bank account will thank you for it.
Are you ready to achieve your financial goals this year? Whether you aim to pay off your debt like Meredith or save money for a specific purchase, let us help. Visit Generations Academy, a free online education center for Generations members. There, you’ll find financial calculators and tools to help you evaluate your money goals before you set them.
Happy New Year!