How To Determine Your #1 Financial Goal For The Year
Setting goals for the new year can be exciting. A majority of the goals people set relate to either finances or fitness. When it comes to improving your finances, there are so many goals you can set. It can almost seem overwhelming.
I’ll be the first to admit that goal overload is not worth it. Setting way too many goals can easily backfire. I used to “over goal” as they say each year and try to go after too many things.
By the middle of the year, I’d burn out and by December, I’d be crushed to realize that I didn’t accomplish as many things as I set out to initially. To prevent yourself from spinning your wheels with too many goals, I’d recommend determining your top financial goal for the new year.
That way you can be focused and intentional with your actions. Here’s how you can determine your #1 goal for the year.
BE HONEST ABOUT YOUR VALUES
Before you set goals in any area of your life, you need to determine your values. Knowing what you value is important because you can then make sure your goals align with your values.
When you set a goal that is based on a core value, you already position yourself to stick with the goal and prioritize it.
Think about what you value in terms of your finances and be specific. Saying you value money is not clear enough. Instead, maybe you find that you value taking trips with your family as a result of having enough money to save for such excursions.
Maybe you value the time freedom you have when you use passive income to regain control of whether you choose to work or not.
Whatever your values are when it comes to money, write them down so you can review them when setting financial goals. Your most important value should tie into your top financial goal in some way.
ASSESS YOUR CURRENT SITUATION
An unrealistic goal is just a wish that you’re unable to act on. Before you start thinking about what you want to accomplish for the year, take some time to consider where you’re currently at with your finances.
How do you feel about money? Do you keep a budget? Do you have debt and if so, how does it make you feel? Think critically about how you manage money and if it can be improved.
Were you faced with any emergency expenses or other surprises that threw you off track financially this past year.
Compare where you are currently with where you want to go then determine what needs to be done to get you from Point A to Point B. That’s a potential goal you can set.
Consider how reaching that goal will change your life. Will it be worth it? If so, that just might be your top financial goal.
CONSIDER WHAT YOU’RE WILLING TO SACRIFICE
Your top financial goal will probably require the most sacrifice on your end. Goals are meant to be challenging or else we’d just do everything we need to do in life without getting all holistic and using goal planning worksheets and checklists.
Think about it, if you already wake up early around 6 a.m. and have no issues with it, there’s no reason to set a goal to become an early riser. However, if you have a hard time getting up early, you’ll need to make a few sacrifices to bring your goal to fruition. This may include turning off the television earlier at night and committing to a bedtime.
Financial goals can be quite a challenge because everyone isn’t perfect when it comes to managing their money and they shouldn’t be.
You need to determine what you’re willing to give up and what you’re not willing to give up in order to reach your financial goals.
For example, when I was considering how I’d pay off my debt faster, I decided to give up things like
- Buying lattes and dining out
- Doing auto body work on my car
- Going on international vacations
- Paying for pricey entertainment and activities
- Buying new clothes
Keep in mind that your list will change over time. For instance, you may not want to give up certain things like dining out and shopping.
If you still have debt or need to save, you can set goals to do these things, but maybe your top financial goal should be to focus on earning more money so you can live a lifestyle that requires more money while still making progress with paying off your debt.
PRIORITIZE AND NARROW DOWN
Your final step in determining your #1 financial goal for the year should be to prioritize the list of goals you generated and narrow things down.
Surely, there are quite a few financial goals you want to reach. Understand that you probably can’t reach them all at the same time.
This is why you need to prioritize which one you want to focus on first. You can use the SMART goals formula to help. SMART goals are specific, measurable, attainable, relevant, and time-bound.
If you are having trouble prioritizing, ask yourself which one change in your finances would make you happiest and feel more secure. For me, it was paying down debt. I like saving, but I love not owing anyone money more.
I have committed to living a debt-free lifestyle and I know it will save me money in the long run by not having to pay anyone interest. That said, any time I have a balance to pay off, that will always be my top financial goal over anything else.
Narrowing down your goals and choosing your #1 financial goal for the year doesn’t mean you can’t work toward anything else. However, setting goals this way will improve your focus and your chances of doing more with your finances.
Note: This article originally appeared at Everything Finance.
Category: Personal Finance
