Setting financial goals is one of the most important favors you can do for yourself. When you prioritize your financial health, you’re giving yourself peace of mind for the future. It also means that you’ll have something to show for all your hard work besides a mountain of bills.
When you need to make a dent in your debt, it starts with a plan. Here’s how you can start your financial goal setting for 2021:
1. Define Your Financial Goals
Financial goals aren’t one-size-fits-all. Maybe you want to pay off a certain debt, or perhaps you want to save for something specific. Whatever your goals, you need to get clear on what exactly you want to achieve with this exercise.
Bonus tip: it’s okay to have more than one goal! Some people find it easier to work on one goal at a time. But you may be able to reach more than one goal in a year. Do what works for you!
2. Write Down Your Goals
Once you understand what you expect from your financial goal setting, put those goals onto paper. Studies have long suggested that writing down your goals makes them easier to achieve. It gives those goals energy early on since it takes effort to write them down. Plus, those written goals can serve as daily reminders on what you’re working toward.
3. Set a Deadline to Your Goals
Goals without deadlines are just dreams. You need to make those goals timely so that you’re more inclined to make progress. If they’re not time sensitive, you can fall into the trap of thinking you’ll reach them one day without ever making any effort toward them.
Set a finish line for each goal. If you don’t cross that finish line in time, that’s okay. You can always readjust it later.
4. Break Your Goal into Smaller, Measurable, Timely Steps
Once you know your starting point and desired end point, it’s time to make a map in between those points. Think of it as taking a cross-country road trip: you wouldn’t drive the whole distance at once! Instead, you’ll have pit stops along the way to track your progress.
This is the same approach with goal setting. You know what you want to accomplish, but you may not be able to do it all at once. Instead, break your goal down into separate steps, where each step brings you closer to your destination.
For example, if you want to pay off a $1,000 credit card debt in six months, divide $1,000 (plus interest) into six payments, then make those payments each month instead of the monthly minimum.
5. Track Your Progress
As you start working toward your financial goals, don’t forget to track your progress to see where you’re moving the needle. It’s easy to think you’re moving forward when your money is moving too, but if you’re only paying down the interest on a debt, you’re spinning your wheels in place.
Setting financial goals is a great way to change your spending and saving habits, and it starts with a change in your mindset. What financial goals will you achieve this year?