New Year’s Resolutions: The Importance of Setting Financial Goals

It’s amazing what a difference a year makes. On New Year’s Eve last night, I was in the same place—my apartment. However, I was in a different mindset. Earlier in the day, one of my friends came by, and we completed our vision boards. This was such a fun exercise. It was my first foray in vision boards. I dedicated aVisionBoardPost Money section to fiscal fitness. It features a hand grabbing cash, a cute piggy bank and positive sayings to remind of me of goals for the year (and the rest of my life, for that matter) such as:

  • “Your money. In your control.”
  • “Take control of your retirement”
  • “Cut costs.”
  • “Add a little richness to your life without spending a fortune.”

For weeks, I had been trying to get perspective on my money goals for 2015. One day, I looked back at my Debt Dash Plan created in January 2014 during the 21-Day Financial Fast. Four small debts are paid in full. Awesome! I had unknowingly completed non-fiscal goals, including dating more (well, at all, but that’s for a different blog), cooking new recipes, reading more and so on. I wrote down all of those goals earlier in the year, but misplaced the paper and wasn’t tracking them. The practice of simply writing them down must have helped manifest them, though. This year, I want to track my progress.

So many of us are making New Year’s resolutions. According to a Fidelity survey, the top three financial resolutions for four years now are:

  • Saving more (55 percent). The median commitment is an additional $200 a month.
  • Paying off debt (20 percent)
  • Spending less (17 percent)

The Fidelity survey also found a correlation between expressing a financial goal and improving one’s financial life. About half (51-percent) of those who made a money resolution last year said they are now “better off financially,” compared to just 38 percent of those who didn’t set one. One out of two. Not bad.

About half (51-percent) of those who made a money resolution last year said they are now “better off financially,” compared to just 38 percent of those who didn’t set one.

Furthermore, for those who made a resolution last year, almost two-thirds (74 percent) succeeded in at least getting halfway to their goal. Even better, 29 percent were completely successful.

I completed two of the goals I set in June, and got halfway through the third one. Progress! It’s all about progress!

Here are my financial goals for 2015:

  • Save $53 per pay period to have an additional $1378 in the emergency fund by the end of the year (That’s how much I would have saved doing the 52-week money challenge, but I like saving consistent amounts instead of $52 one week; $51, the next, and so on.)
  • Learn more about investing by reading at least one book or completing an online tutorial quarterly
  • Reset Roth IRA contributions to contribute at least $100 per month
  • Pay off two of the three remaining credit cards in full using the Debt Dash or snowball method
  • Pay at least one extra student loan payment within the year by making a small extra payment each month

Unfortunately, the extra student loan payment will go toward interest not the balance, but I gotta do something. It’ll make me happier to know that I’m, at least, trying to speed up the repayment process.

In You Don’t Have to Be Rich: Comfort, Happiness and Financial Security On Your Own Terms, personal finance champion Jean Chatzky says just working toward your goals —not even completing them — boosts happiness.

“People who are steadily working toward their goals are much closer to the happiness levels of people who are already there then those they’ve left in the dust. … You don’t have to hit your marks to be happy. Just making the effort to a point at which you start to notice results makes a tremendous difference.”

“You don’t have to hit your marks to be happy. Just making the effort to a point at which you start to notice results makes a tremendous difference.”— Jean Chatzky

Chatzsky also says writing down goals helps you see them clearly, realize all the interim steps you need to take to accomplish them, see how much money you need to put toward them and think of the trade-offs.

“And—oh yes— it makes you happy,” she writes. “Goal setters are happier with their finances and less likely to worry about their money. Likewise, financially happy people are more knowledgeable about the amount they need to save in order to reach their goals, and are more likely to be on track to do so.”

Follow more of Chatzky’s tips below:

The Four Steps of Setting Goals

    1. See what you want. (Visualization is key. Be specific. Be clear. Once you have your vision, focus on how it makes you feel. To become a better forecaster of your own happiness, you have to think about how those things, people and outcomes will make you feel if and when you get them, ex. winning the lottery.)
    2. Write your goals down.
    3. Turn your goal into an action plan. (Break it down into manageable parts. Saving $5,000 in a year turns into saving $100 for 50 weeks.)
    4. Understand the time involved. (It won’t happen overnight.)

The Six Keys to Achieving Goals

“People who have at least started to achieve their goals are much more likely to feel useful, content, and confident.”

  1. Begin.
  2. Recognize the obstacles in your way. (i.e. emails from daily deals, hanging with certain people, driving by a certain store.)
  3. Build better habits. (“Many people make the mistake of looking at goals as a point in time some distance away. You’re better off if, instead, you can look goals as a series of lifelong changes you have to make to achieve those desires.”)
  4. Automate where you can.
  5. Set up reminders.
  6. Focus on tomorrow (not yesterday).

In Good Debt, Bad Debt: Knowing the Difference Can Save Your Financial Life, author  Jon Hanson writes that goal setters should consider the BDO method (Be, Do, Own) to understand why, not just how, you’re going to complete goals.

  • Who will you become?
  • What will you be doing to achieve these goals?
  • What do you see yourself owning?

That’s why it’s great to name your goals and savings funds, like folks do on their online Capital One 360 accounts. Give goals names and meanings. And, hopefully, you’ll be on your way to success.

Cheers to 2015!

Advertisements

One Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s