Not everyone knows how to set financial goals, but you can learn. A focused, step-by-step plan will help you meet your purpose.
Everyone knows that goals are important for growth. Unfortunately, not everyone knows how to set financial goals. Setting goals for 2021 is the best way to recover from any money-related hardships 2020 rained down on you. It can be hard to recover from major setbacks but having a plan helps.
Find your starting point
First, download the 2021 Goals Planner to take notes while you’re crafting your goals.
The easiest way to know where you’re starting is to calculate your net worth. This will show you how much debt you have vs how much you have in assets. I explain more about finding all your debts and doing the calculations here, but it’s an easy figure to find.
Record your net worth as of January 1, 2021 (or close to it), with the details of your account balances. Save that paper and compare the numbers to the end of 2021. Ideally, your debts will go down & your assets will go up, which means your net worth increased over the year.
- Real estate
- Bank accounts
- Retirement accounts
- Other investment accounts
- Other items of significant value
- Vehicle loans
- Credit cards
- Student loans
- Personal loans
- Taxes liabilities
- 401(k) loans
- Medical debt
- Cell phone (if anything is still owed on it)
Brainstorm your financial goals
- What stresses you out financially?
- How much debt do you have? How do you feel about that level?
- Do you have a mini emergency fund saved up?
- Do you follow a budget and track your expenses?
- How much are you contributing to retirement? Is that on track with your age & expected retirement lifestyle?
- If you could change one thing about your finances, what would it be?
Use the 2021 Goals Planner to jot down notes from your brainstorming session to help you make 3 goals for the year… or just 1 really great goal. Don’t stress out if you can’t make 3 goals.
I only have 1 financial goal for 2021: to pay off $24,000 in debt. Accomplishing that is going to take all of our focus (and extra money), so I’m not even going to make another goal. It just wouldn’t happen this year.
Set SMART financial goals
You’ve probably heard of SMART goals, especially if you’ve taken a business class. If you haven’t, it’s an acronym to help write actionable goals.
- Who is involved? You, your spouse, your children? Your employer? Your friends or extended family?
- What is the main objective?
- Where will you do this?
- When does this need to be done? What is the schedule for accomplishing your goal?
- Why is this important?
Put numbers in your financial goal:
- How much (in dollars) do you want to pay off or save?
- A percentage increase or decrease
- When or how long
Don’t set goals that are outside of your abilities or are impossible to achieve. For example, if your household income is $40,000 a year, it’s impossible to pay off $100,000 in debt in one year (unless something drastically changes).
Your goals should challenge you but not discourage you.
Your financial goals need to apply to your life. They should align with your beliefs and lifestyle, the things that are important to you.
What is your deadline for this goal?
Furthermore, set up checkpoints along the way – where do you want to be in 3, 6, and 9 months?
What should you do this week to set yourself up?
Do you need to do anything every month?
Write down your financial goals
Recording your goals on paper makes them real and concrete, something you should pay attention to. Post your 2021 Goals Planner on your fridge or near your “office” space.
Fold it up and keep it in your wallet, so you’re reminded of your goals when you’re considering making a purchase.
Keep your goals and the steps needed close by. You want to be reminded of your larger purpose when you’re considering a purchase. Remembering you want to pay off thousands in debt might just keep you from ordering takeout when you get home at the end of a long day.
How to set financial goals you can achieve: Make a plan
After carefully crafting your SMART goals, you need to figure out how to accomplish them.
If your goal is to save a certain amount or pay off a certain amount of debt, break that down into weekly or monthly amounts. Smaller steps feel more achievable and are less overwhelming.
If your goal is to invest a specific percentage in retirement, your steps could be contacting your HR department, setting up an online account, and watching a tutorial on how to properly set up your automatic contributions.
Try to figure out what you don’t know about achieving your goal. Determining how to learn what you need to know will probably provide you with the steps necessary to reach your goal.
Really try to fill out all 3 steps for your goal on the 2021 Goals Planner. Breaking a big goal down into manageable steps will help keep you motivated and on track. That’s going to be especially important when things get hard… or it’s June 2021 and you’ve been working so hard for six months but still have an eternity ahead of you.
Even if the step seems obvious or silly, write it down. If it’s in your face, you’re more likely to do it.
Make goal-oriented purchases throughout the year
Keep these goals in mind when you are spending any money. Make sure that you’re spending your hard-earned money in a way that aligns with your goals for the year.
- Does this purchase help or hinder my goals?
- Could this money be spent in a better way?
- How many hours do I/my partner need to work to pay for this? Is it worth that?
- Does this purchase fulfill my non-financial goals for the year? If your word of the year is family, budgeting $50 a month for a family activity makes sense, even if it’s a small setback to your debt payoff deadline. Be reasonable and balance your different goals
Even if you’re considering spending $5 on a coffee, really think about it and how it affects your big goals. $5 five days a week is $1300 per year; $5 each week is $260. Keep those numbers in mind when you’re spending all year long. Do your own calculations if it helps you rein in your spending.
Knowing how to set financial goals will set you up for the coming year. Start 2021 off with focus and purpose.