How to Create Smarter Money Goals in 2021 | Personal finance
First, find out about the status of your finances, including your income, monthly expenses, and your emergency fund. Understand where you are now to get an idea of where you might be in a year.
Then, think about your personal priorities and values - and how they may have changed because of the pandemic – to find out what to expect from your finances. You may want to go back to where you started in early 2020, a year ago of financial challenges. Or maybe you want to use the money you saved during your stay at home towards a down payment on a house.
“Start with an understanding of the why’s behind your goal,” says Kristen Holt, CEO of the nonprofit credit counseling agency GreenPath Financial Wellness. “A big goal is ‘I want to get rid of my debt,’ but go deeper and ask why. Will You Sleep Better? Will you be able to enjoy life more? Make it clear why, because that can motivate you to stick to your goal. “
Create SMART (R) monetary goals
Now that you’ve set your priorities and motivations, it’s time to lay the groundwork for building your financial future. This means that you design your goals in such a way that they are easier to achieve. The SMART Goal Setting Template can help:
- Specific: Make your goals as specific as possible. For example, if you want to throttle your spending, set how much you spend each month on unnecessary items. Then set an exact dollar limit for such expenses.
- Measurable: Choose a way to track your progress. If you are Pay off debt, think about using a debt tracker. Or, if you want to save a specific amount of dollars, you can visualize your goal on a saving progress graph that you will color in over time.
- Reachable: Your goals must be something that you can achieve within a year. For example, if you are paying off $ 10,000 in credit card debt, find out what you can realistically pay monthly, multiply that by 12, and use that amount as your goal.
- Relevant: Choose goals that reflect your personal values. Similar to finding your “why”, choosing relevant goals will help keep your 2021 financial plan connected to your life goals. If you’re looking to retire early, consider increasing the contributions to a retirement account so you can meet this multi-year goal.
- Time limited: Setting a deadline can keep the pressure going. And think about breaking your overall goal into smaller pieces that you will accomplish on a monthly basis. Achieving monthly goals can provide a steady feed of accomplishments that can keep you motivated.