How to set financial goals for the new year
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To ring the new year, To select publish a new money challenge every day during the first week of 2021. Think of these tasks as your deep financial cleanse, based on expert advice, to help you align your financial choices with what matters most to you. These are simple tasks, but they require commitment. Are you in it?
It’s the fourth day of seven.
If you’ve been following our 2021 Money Challenge for day one, you should already have made a list of your assets and liabilities to get a feel for your situation. At day two and day three, we’ve looked at how much you spend and how much you have in your emergency savings. Once you’ve got the basics, it’s time to think about where you want to go in the future.
When planning for the year ahead, you need to know where to aim.
Regardless of your income level, money is always limited, which means you have to choose how and when to use it, and for what. You often have to juggle priorities that sometimes work together, such as saving and / or investing for retirement. But other times the goals may seem contradictory, such as deciding between pay off debt or save for an emergency fund.
Let’s face it: we all know where we are want to to be. It’s easy. Most of us would choose not to go into debt and would probably have a few extra zeros added to the total we have in our verification, savings and retirement accounts.
But it is not always easy to know how to get there. It can take a long time to reach our big financial goals, and at times it can seem overwhelming where to start. You’ve already laid the groundwork by getting a feel for your expenses and income. Then start asking yourself a few questions so that you can really understand your goals.
Here are some examples of questions you might want to ask:
- Am I happy with my net worth?
- What are my advantages? (Due to raise, good health benefits, owner, great credit rating, comfortable pension, etc.)
- What are my disadvantages? (Worried about a layoff, paying off an old credit card, a high mortgage or high rent, etc.)
- If I continue to save at this rate, when can I retire? (Or did you save enough for a down payment? Being able to afford a vacation? Etc.)
- How much could I save if I put an extra $ 10 in a savings account each month? Or $ 10 a week?
- How much I spend each year on interest on personal loans, credit card, mortgages and auto loans. Is it worth it?
- How much i spend for current account fees, and should I consider changing banks?
- What is my biggest dream / goal for this year? The next five years? The next 10 years?
- What compromises am I prepared to make to achieve these goals?
- Should I adjust my goals?
Or try these fill-in questions to spin your wheels:
- I feel __________ for my finances, but I would feel better if _________.
- Paying back __________ would help me accomplish _________ and make me feel _________.
- Buying __________ would help me accomplish _________ and make me feel _________.
- Earning an additional $ _____ per month would help me accomplish _________ and make me feel _________.
There are many tools that can help you relate actual values to the above goals:
- mint: Set a personalized goal for yourself after you link your accounts, and Mint will calculate how long it will take you to reach it. Goals may include paying off credit cards and loans, as well as saving for big purchases like college, homes, cars, and vacations. Set your goal and adjust your monthly budget to see what’s realistic for you.
- Retirement income calculator: This free tool from Vanguard helps you decide how much money you will need to live in retirement. (Try to avoid comparisons: your definition of a comfortable retirement may be very different from that of your friends or family.)
- Personal capital: The free retirement preparation tool can help you determine if you’re on track to retire based on the stock market and the current state of your retirement accounts.
Once you plug in the numbers, you’ll start to get a feel for how long each goal will take you, as well as how much money you need to spend on your goals each month. At this point, you’ll have a realistic timeline and know if you need to change your budget or even take action to reach your goals faster.
Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.