This post was originally posted 12/30/19 under the title 2020 Vision: 5 Ways to make 2020 a Better Financial Year. Updated 01/04/21. (We all know 2020 didn’t go as planned…)
If you met me in person, you’d find that I’m pretty organized. I make a list for everything — helps keep my brain all sorted out. I’m also super goal oriented. I love dreaming big and outlining steps to accomplish that goal. I even have a sign hanging in my cubicle that says, “Set goals and crush them.” As fun as it is to make the goal, it is way more fun watching my coaching clients crush their goals from my front-seat view. I pretty much lead the excited squeal and happy dance when one of my clients reaches a financial goal.
That being said, without a doubt, I love when the New Year comes around. It sounds cliché, but I just love starting fresh. A new page. Day one. January 1 holds so much hope and promise of new habits and goals to attain. You often hear health habits or career goals floating around as New Year’s resolutions, so wouldn’t it also make sense to map out a few financial goals as well? Below are a few financial goals to consider developing in the New Year.
1. Out the old, in with the new. Time to be honest with yourself for a sec. Do you currently have a financial habit that you know needs to change? Perhaps you are a chronic impulse spender, always busting your budget on that new gadget or clothing item. Maybe you have credit cards and want to pay them off in full every month but somehow that just doesn’t happen like you thought it would. Maybe you transfer money over to savings each month but end up withdrawing it anyway to fund a leaking budget category. Perhaps, it is just a feeling you have. Like you are one car repair away from totally drowning in your finances. Whatever it is, identify the weak areas within your financial life. We all have weak areas. If you looked at my eating out category, you would see my wallet cries tears of Jimmy John’s and caramel lattes more months than I’d like to admit. Let’s identify these areas first, and then we can move forward with a plan to improve. Do you have a spouse? Be sure to set aside time to discuss changes you wish to make together. (Need a guide for talking about money with the spouse? Click here.)
2. Get. a. budget. Look, I know it isn’t fun but if you are not operating on a budget, this is your year to really give it a try. It can be tough in the first few months, trying to decide how much to spend on what and wrangling in extra expenditures. But once you get the hang of it, you really start to operate your finances on cruise control. I recommend the free budgeting app Every Dollarfrom Dave Ramsey. When you get to that cruise-control stage, this resource is very helpful. You can clone your budgets from month to month so planning the monthly finances is just a click of a button and a few minor adjustments.
As a financial coach, I walk through budgets with my clients every day. Sometimes, the expenses are more than the income. So if that happens to you the first time you write out a budget, I am going to tell you what I tell all of my clients: “Today is day one.” Budgets are not meant to work perfectly the first time. They are not meant to be static, either. Expenses will change. Income will change. Do not be discouraged if you do not stick with the budget 100% your first month or you way underestimated expenses. Don’t be discouraged if you have to tweak, adjust, then tweak again. Today is day one. You’ll get the hang of it.
3. Review your expenses. Once — maybe twice — a year, it is a good idea to sit down and review where your money is going on certain items. I like to call these the “set it and forget it” items. You sign up, put it on auto pay, and BAM — one year later you barely remember your service provider, let alone the price you are paying. Most of the time, these items are your variable expenses — particularly, the entertainment ones. Check the cost of your cable or internet bill. Are you paying $100 for internet while your neighbor is paying $60 with a different company? Same with your cell phone bill. What about your insurance? Could you be saving money by bundling your policies? Yes, it is annoying to call customer service and try to inquire and negotiate new rates but think of the savings! Where else could you cut expenses that didn’t impact the fun side of your budget?
4. Start a Christmas savings. I know you are still recovering from Christmas 2019 which was like, 4 days ago, but it is never too early to plan ahead. This year, consider paying cash for next year’s Christmas by setting aside money each month for gifts. Tally up the total cost of how much you spent this year on gifts and then decide if you want to spend more or less next year. Then, set up an automatic transfer to a savings account or open a Christmas Club account at your local bank. Come next year, you will be thanking yourself. (Read more about how to conquer holiday expenses.)
5. Goal plan. Dum duh duh duuum! You’ve made it to the fun part. Okay, keeping in mind all of the above items and changes you’d like to make, let’s get to writing out some goals! Remember, if you are gaming in two-player mode with a spouse, sit down together and map these out. Use this goal sheet to jot down one big goal you want to accomplish this year. Is it saving for a down-payment on a house? Eating out less, or giving to charity more? Or, maybe it is knocking out some serious debt. MAYBE you are planning a big trip to Paris. (In that case, I’ll pack my bags and tag along.) Whatever it is, dream big or small, but make sure it follows a few rules:
- Goals must be S.M.A.R.T. (Specific, Measurable, Attainable, Realistic, Timebound.) The more detailed you get, the better. You want to know the who, what, when, where, and why for setting this goal.
- Goals must be written! Putting your goal in writing helps you take ownership of it. It also gives you a tangible item to post somewhere where you can see it and remind yourself why want to reach it.
- Track milestones. It is important to know where you are on your path to your goal. Think of benchmarkers for your goal. For example, say that I want $1,000 in a savings account by December. Well, one of my benchmarkers would be to have $500 saved up by June. Tracking these milestones helps you evaluate whether you are on track to reach your goal or if adjustments need to be made.
Now, when you reach your goal, LET’S CELEBRATE! Write out a small reward you will give yourself for reaching your goal. This could be a nice dinner once you’ve saved for your emergency fund, a celebratory ice cream cone for operating on a budget for 6 months straight, or perhaps a small weekend getaway with friends or family for finally kicking that last student loan. Celebrations help add a little incentive for keeping hyper-focused on your goals.
Once you have created one big goal, feel free to print out another worksheet to outline more future goals! Goals can be short-term (less than 12 months to accomplish) or long-term (more than 12 months). Prioritize goals by their end dates and your priorities. Don’t try and accomplish too many things at once, remember goals must be “R” — Realistic!
Say priority #1 for this year is to get $1,000 in an emergency fund. Once you complete that by the target end date, you can then move on to your second goal, saving $5,000 for a used car. Goals do not have to be worked one at a time, January 1 to December 31. Once you accomplish one, go ahead and move on to your next goal.
Whether you love goals like me or you find goal-setting intimidating, you are capable of making and achieving your goals. January 1 holds a whole lotta promise for you and your financial future. The fresh start is what everyone loves about the New Year — and why it’s such a good time to re-evaluate priorities and set goals. No matter if you feel confident or discouraged in your current financial situation, take advantage of this time and make this year the year you rock your financial life!
Let me know what financial goals you plan to accomplish in the comments below!