Setting Financial Goals for the New Year

As we close out the year, let’s pause to count our blessings with family and friends.

As we think about the coming year, I recommend that you consider setting some financial goals for yourself and your family. If you don't set goals, it will be unlikely that you will make much progress in improving your financial situation.

So, start the new year by identifying several financial goals you would like to achieve by the end of the year. They can be short or long-term goals, or a combination of both.

Because it can be hard to take the first step, here are some suggestions. Your financial goals may be different.

1) Capture the employer match for retirement contributions

If your spouse has a 401(k) or 403(b) IRA plan at work, make sure he or she contributes enough to receive the maximum employer matching contribution. This is free money and should be at the top of your list of priorities for the year.

2) Gain more control over your expenses

Seek to reduce or eliminate your credit card debt. If you can’t pay off your credit card in full at the end of each month, this is a sign of over-spending. If you have an unpaid balance, start by paying off any new spending each month. If you can’t pay off this debt in one year, try to reduce it by half or a third.

3) Establish a three-month emergency fund

Life is full of unknowns, so set up an emergency fund to cover the unexpected (house repair, medical bill, loss of a family, etc.). You may want to start by setting a smaller goal of a one-month emergency fund for the first year.

4) Set up a car replacement fund

Borrowing money to buy a car means you are paying interest for something that is decreasing in value over time. Ideally, you should pay cash for your next car. If this isn't possible, start saving for your next car so you can increase your down payment substantially.

5) Save at least 10% of your profit for your retirement

The sooner you start saving for your retirement, the better. 10% is a reasonable goal if you are in your twenties or thirties. If you are older, saving 20% should be your goal.

These five financial goals may be very different than the ones that make sense for you. You may only want to set one or two goals this year.

Once you set your goals, monitor them throughout the year. At the end of the year, measure how well you have done and then set new goals for the next year.

Don’t be discouraged. Don’t worry if you don’t meet all of your goals for the coming year. It’s more important to regularly set goals and mark your progress. Doing so will make it much more likely you will meet them.

Taking small steps now will make a big difference in the long run.

What financial goals will you set for the coming year?

Tom Copeland - www.tomcopelandblog.com

Image credit: https://www.clevergirlfinance.com/blog/examples-of-financial-goals/

For more information, see my book Family Child Care Money Management and Retirement Guide.