Setting Goals vs Resolutions
It is a new year! How many of you made new years resolutions? How many of you have already either broken or abandoned those resolutions?
Most statistics say that around 80% of New Years resolutions fail. In fact, 43% of people expect to fail by February. Only 8% feel they are actually successful by the end of the year.
In fact, many people say they don’t even bother with resolutions anymore because they feel like it just won’t work.
But why is this not working? Many will say it’s a lack of accountability in the resolutions or they are not specific enough.
So what is a what is a resolution? It’s a statement of what you to change. For example, you may resolve to get healthy or save money.
A goal goes a bit further. It is a statement of what you want to achieve, the steps you need to take to get there and when you would like to reach it.
What if you go further than a resolution and create a goal?
Even a planned goal can feel out of reach however, if you aren’t realistic. Start by declaring your resolution, then get specific about it. Also, consider keeping it visible so you don’t lose sight of it. Some people have something as simple as a stick note in a place where they can see it. Others create vision boards with what they want to accomplish. Just choose what’s right for you so that you actually do it.
Also be careful how many goals you set so that you don’t get overwhelmed. Maybe start with 3 and use a stair step approach. Choose a goal or two to add to your habits for the first quarter or even as long as 6 months. As you become accustomed to those, add a couple of more. This helps you adjust versus what may feel like trying to change your entire life and feeling like you can’t keep up.
How many of us jump off and adopt a radical diet and want to exercise 6 days a week? Some people have that personality and can do it, but often it doesn’t work with our busy lives. Or we do it with too many things at once and suddenly we are overwhelmed.
But what if you introduced a couple of new things every week or two into your diet? And instead of 6 days a week, start with 2? And then build on that every couple of weeks or even every month?
You can do this with any goal. Habits can be hard to break and so can building new ones, so be patient with yourself and be realistic about what you can do.
How many of you immediately think of health when you think of New Years resolutions but what about your financial health?
Here are 5 suggestions for financial goals you could you strive for:
1. Save more – This is a great resolution but how do you make that a true goal? Start with stating what you are saving for.
a. Emergency funds are a great place to save but how can we make that more specific? It is recommended to have 3-6 months salary in an emergency fund at a minimum so why not start there.
Determine how much do you need to have in an account to reach that goal and then when you would like to accomplish that. Once you have that determined, simply divide the amount by the number of months to give you the amount you need to save each month.
For example, if you need $12000 in your account in 12 months, divide $12000 by 12 and you get $1000 a month. You can go even further if you wish, by then dividing your monthly amount by how many paychecks you receive a month.
Knowing your goal and having the steps to get there will help you stay on track and stay accountable.
b. Retirement funds – this can be a little trickier. There are many factors to consider here, but the best thing to do is look at your situation. Consider how old you are, how much you currently have in a retirement account, when you are planning to retire and how much would you like to have at that time. From there you can determine if you need to raise your retirement contribution. If you aren’t contributing, perhaps it’s time to start! You can always start small and build to more.
2. Pay off debt or be debt free
This is usually credit cards or maybe your car. Again, look at what you owe and when you would like to pay the debt off.
a. For Credit cards, I recommend the snowball effect. We’ve talked about this before. You look at your card with the highest interest rate and pay it off first. Pay as much as you can a month and just do the minimum on your other cards. Once you pay that one off, you do the same with the next one until you are all paid off.
b. For the car, look at your balance and see what you need to pay each month to reach your goal at the time you wish.
3. Owning a home – this is big ticket purchase and will require a bit of planning.
You want to start by looking at what kind of house you want. Where, how big, what would you like in it.
Then look at how much you can afford to pay in your budget. Maybe getting that debt paid down would help that number. Be conservative. Homeownership costs more than just the mortgage payment so never stretch yourself too thin.
Next consider your credit score. This can determine what percentage rate you will get on your mortgage. If there are discrepancies, get those cleared up. If there are liens create a plan to get those paid off.
Now that you’ve considered the type of price range, this gives you an idea of what kind of down payment you need to save for. Don’t forget any other expenses you need to be prepared for and save for those. For instance, if you want a fixer upper, saving to have money to help cover those expenses may be prudent.
4. Education
a. You may need to save for a childs education. Here you want to consider your childs age. Also Look at what type of college you would like to save for. There are several different types of accounts that can be used for this. I recommend researching options to choose what works best for you.
b. Paying off student loans. You may want to pay off or at least pay down your student loans. Once again, look at what you owe, your timeframe for paying off the loan and from there you can determine how much you need to save or pay extra each month.
5. Having fun! This can be a lot of things but most likely its not a regular budgeted purchase, it’s a little more expensive.
a. New computer
b. Big screen TV
c. Vacation
d. Boat, RV
e. Home Improvements - Improving your space can really make you happy!
I bet by now you know how to get there right? Figure out how much you need to save and when you will need it and then budget that amount every month until you reach your goal. Making the goal specific and understanding the steps you need to take to get there can really get you out of that failure percentage for New Years resolutions and to success in reaching your goals!
A little planning and effort, maybe a little adjusting of your budget and you can do this!
And you can always revisit during the year as things change or you reach your goals and get ready to set new ones.
It’s time to reach your goals!