2019 is well on its way and it’s the time of year for reflecting on the year that has just passed, and setting new intentions and goals for the year ahead. New years goals and resolutions can often take on the “set it, and forget it mentality”. How many times have you made it to the end of the year not even remembering what you decided to set as your goal(s) at the beginning of the year?
A study done by Statista showed that 58% of Americans had a new year’s resolution to save more money, but another study showed only 8% of people actually keep those new year’s resolutions they set out for themselves. This year, let’s make sure you don’t fall into that statistic of failed resolutions.
For setting realistic goals that are achievable to reach but still challenge you, it’s important to follow some of these key tips:
Assess where you are
Before you set any financial goals for the year, you need to assess where you are financially. Look through your savings, debts, investments, nice-to-have lists, etc. and assess your financial status. This may seem stressful, but gaining a good understanding and knowledge of your finances will help you set realistic and achievable goals for the year ahead.
Set a budget and stick to it
One of the best things you can do for your finances is to set a budget. The budget should be achievable and include all your major expenses along with your income.
To start, note your net income by creating a budget to identify the money you have coming in. Remember that it’s easy to overestimate what you think you can afford if you’re looking at your salary as what you have to spend. However, you need to ensure you are looking at your actual income after deductions and taxes. If you have an additional source of income like a freelance or part-time job, also include that income into your budget.
Next you’ll want to track your spending. Tracking your spending can feel overwhelming at first but it’ll become a habit pretty quickly. Keeping track of your spending will help you better understand where you can make adjustments and save. Often we don’t actually realize how much we have spent or are spending in specific areas. To begin, list your fixed expenses like your rent/mortgage, water/hydro bills, phone/internet bill, etc. These will be all your regular monthly expenses that you can’t avoid or change. Then list your variable expenses that can change month-to-month like groceries, gas, entertainment, etc.
Once you have a good understanding of the above, you can begin to set goals in each spending category. Make a list of the financial goals you have and want to accomplish in both the short and long-term. Remember that these may change but identifying your priorities is a good place to start with your budget.
Pay off your debt
Debt is a significant burden and can prevent you from achieving your financial goals. Paying off your debt is important when setting goals because usually your debt is accumulating interest. A few tips for getting through your lump of debt are:
- Pay off the most expensive and highest interest debt first
- Pay more than the minimum balance
- Halt your credit card spending so you prevent yourself from creating more debt
- Put work bonuses and extra, unexpected income towards your debt
- Reward yourself when you reach milestone in paying off your debt so it seems like less of a burdon
Plan for retirement
It can be hard to think as far ahead as retirement when you are young and still trying to pay for the expenses you have now. However, starting to plan for retirement early is important, and your older self will eventually thank you for it. Determine how much you will need to retire, and decide how much you can put aside and save each month or week. You may find it valuable to put these savings in a separate account where you can’t take the money out easily like a RRSP.
Setting budgets and goals are great and all but your efforts will be pointless if you don’t have a plan to stay on track with your finances. Staying organized is critical when trying to meet your financial goals for the year. You need to stay on top of your budget, your spending, and make sure you don’t lose track of what your end goal is. The good news is there are a lot of apps and programs out there that help make this a lot more manageable such as:
Make an emergency fund
You never know when an emergency is going to strike, and suddenly you’re stuck in a financial pickle because you obviously didn’t plan for an emergency to happen. Everyone is vulnerable to unforeseen emergencies and without properly planning, your budget could fall apart when an emergency strikes. This is when having an emergency fund is important. An emergency fund will provide a cushion shall any emergencies arise and will allow you to not completely lose your financial plans when or if one happens. An emergency fund should be at least two to three months worth of expenses to cover yourself if something unexpected comes up like a lay off, medical expenses, a car accident, etc.
Review your investments
If you’re already investing then you are on the right track. However, likely you have a financial advisor that’s helping you with these investments, and there are so many times that investors don’t know as much as they should about where their money is going. Many financial advisors will put your money in funds with high fee and high commissions. Being aware of where your money is going will make sure that you don’t lose it due to lack of knowledge. Educate yourself on investing and start making changes. Look at ways to get greater returns with less risk.
Now that you have gotten the key tips on making achievable goals, it’s time to think of what types of goals you actually want to set financially for 2019. You may even want to start with some of the key tips listed above. For example, perhaps your goal is to just start and follow a budget, if it’s something that you don’t already do, or maybe it’s to put X-amount of dollars into your emergency fund. However, to give you some other ideas on goals you can set financially for the year, here are some thought starters:
Get out of debt or pay off a certain percentage of your debt
Getting out of debt is a huge goal for many people, however, if you’re swimming in debt, it may be an unrealistic goal to set for yourself to just pay off your entire debt in 2019. Instead, figure out how much is mangeable to pay each paycheck or month, and then set a realistic goal of what percentage of your debt you can get paid off by the end of 2019. This will also make your goal seem more achievable. To set out on the right foot:
- Set up a debt payment plan that is inline with your budget
- Sell items to pay off debt
- Reduce unnecessary spending such as entertainment
- Get a temporary job or source of income that can help you pay of your debt
Start saving money for XYZ
Whether you’re looking to buy a house, car, go on that dream vacation, or even just buy a new cell phone, whatever your goal, and however big or small, setting a goal for how you’ll achieve this can be a great new years resolution. Again, take a look at how much you can put aside each month. Remember that sacrificing a few dinners out a month, or your morning coffee every morning from Starbucks will be worth it in the long run. Some other ways to save money is:
- Meal prep your lunches so you aren’t tempted to buy them
- Make your own coffee every morning
- Look for no name brands at the grocery store & only buy what’s on your list
- Take a look at ways you can cut back on utilities
- Look into payday loans in Canada that financially make sense for your situation
Learn more about money and finances
Sometimes a great place to start with a goal for yourself is to learn more about managing your money. There are a ton of free resources online, plus some great books and magazines out there. Set a goal for yourself to read at least one a month, or set aside time each week to read about a specific topic. Some specific goals you can set to help you expand your knowledge on your personal finance are:
- Enroll in a personal finance class
- Read a book about personal finance
- Subscribe to personal finance newsletters
Investing can be a really wise thing to do with your money, however, many people don’t actually know how to safely and properly invest, and that leads to a ton of risks. When you are just starting out, you may want to look into finding a financial planner to help teach you the ropes and ensure your money is going into the best places. A good financial planner will ask the right questions about your finances and life goals, then give you suggestions on how you can get the most from your money and achieve those goals. You can also add this to your financial learning goal, and take courses, talk to professionals, and read-up on investing to begin to educate yourself so you feel more confident in where your money is going.
Better your career
One of the ways you can begin growing your income is to look at ways to better your career that you’re currently in. How can you advance in your career? Where do you see yourself in 5-10 years? Even if you love your current job and you like the stability, look at ways you can improve and think ahead to next steps. Maybe it’s seeing how you can gain a promotion or a raise, maybe it’s looking out there to see what other jobs exist that could be paying you more or help you reach a point in your career where your earnings are more inline with what you want to achieve.
A new year can be incredibly exciting, it can feel like a clean slate, and it usually motivates us to better the things in our lives that we didn’t get around to in 2018. Instead of setting a goal for yourself for 2019 that you’re going to forget about by February, be realistic and keep the end goal in mind. Will it be worth it in the long run?