After seeing the #NewDecadeWhoDis posts or “Best of the Decade” lists on social media for all of January, you’re probably just as over it as I am. The energy of the new year is so powerful, but you know what else it is? Temporary!
You’ve gotta go out of your way to make sure your financial resolutions for the new year are actually permanent so you can achieve it by the end of the year. It’s time to set aside at least 30 minutes for a new year’s financial resolution check-in!
What the heck is a New Year’s financial resolution check-in?
The step-by-step process you take to make sure you are committed to your financial goals for the year and that these goals are realistic and attainable for you. It’s basically setting you up for success with your money goals!
Why do I need to do a new year’s financial resolution check-in?
The energy of the new year does not last very long. You may have gone to the gym the first three weeks of the new year and then last week, maybe you skipped a few days because you slid back into those old routines of snacking while you Netflix and chill… No judgment, my friend! The reality is, if you don’t catch yourself slipping, you won’t be able to adjust your course and get yourself back in line! That’s why you need to check-in with yourself!
How do I do a new year’s financial resolution check-in, anyway?
Great question! Here are a few simple steps to follow…
Step 1: Start with a SMART money goal framework
The acronym SMART stands for a goal that is all of the following things: Specific, Measurable, Achievable, Realistic, and Time-based. If you go through your goal and it doesn’t check every box, then you better go back to the drawing board! Research shows that if you have a SMART goal, you’ll be more likely to successfully reach that goal. Let’s look at a common financial resolution and give it a SMART goal makeover.
“I want to save more money in 2020.”
While the intention behind this goal is great, it’s not very likely that it’ll lead to any savings behaviors. The first problem is that it isn’t Specific enough. How much money do you want to save? We need numbers! Instead, let’s change it to: “I want to save $3,000 in 2020.” Specific numbers are super important because they allow us to map out the major benchmarks we need to hit in order to succeed. With this $3,000 goal, you can set mini-goals for yourself throughout the year such as having $750 saved in the first quarter, $1,500 by June till you hit your final goal! Now let’s move on to making it Measurable: “I want to save $3,000 by December 31, 2020.” Adding in the Achievable part would be including how you’ll get there. So, let’s add that in. “I want to save $3,000 by putting $58 in my savings account every week through December 31, 2020.” To check if this goal is Realistic, you’ll need to match it up to your earnings. If you only earn $150 each week at your internship, then saving over 20% of your earnings may not be realistic here unless you pick up a second job to supplement your income. Finally, you’ll want to make sure the goal is Time-based, which means there’s a date or timeline included. “I want to save $3,000 by putting $58 in my savings account every week through December 31, 2020.” Yep, we did that! You can also use Mint’s feature– Goals to set up your SMART goals!
Step 2: Action Planning
Now that you have a new and improved goal, you’re ready for the next step: action planning! A successful action plan is even more detailed than the SMART goal. This is great to do in a planner or on your Google Calendar if that’s what you prefer. List the action you need to take and when it needs to be done. If you’re able to automate the action, that’s even better! For example, setting up a weekly automatic transfer of $58 from your checking to your savings account will automatically save you that $3,000 by December of 2020, without you having to lift a single finger! If your goal doesn’t allow for this, then you’ll need to schedule your action and find a way to sandwich it somewhere in your daily routine to make sure you get it done. For example, say your goal is: “I want to learn how to invest in a Roth IRA, open my own account by April 2020, and invest $500 by December 31, 2020.” This is an awesome goal, but it has multiple parts, so you’ll need to go step by step. Start by scheduling the times when you’ll learn about the Roth IRA and be specific about what questions you should be able to answer by each benchmark date and then move on to the next steps as you learn more!
Step 3: Create habits that support your goals
Tons of new research shows that the most effective way to reach your goals is to create habits that support those goals. If you create a blog, a journal or even have a social media account where you share your weekly progress with your friends and family, you’ll start a habit and keep yourself accountable! This is a great way to make sure you have a higher chance of reaching the goal. You may even begin to motivate others to set up their own financial goals and work toward them.
Step 4: Have regular check-ins
Although step 3 is optional, this fourth step is essential. The most popular financial goal is to “save more money.” That is not a bad goal at all, but in the world of personal finance, there is so much more that affects your financial health. So follow this check-in list below to make sure that your financial resolution or goal is the right one for you based on your needs:
- Income: Do I know where my money comes from and whether it is enough for my needs and wants? Do I need to consider increasing my income by starting a side hustle or getting odd jobs?
- Budget: Do I know how I am spending my money each week/month? Does my spending match my priorities? Do I have a sound budget in place or do I need to create one and begin using it weekly/monthly?
- Insurance: Are my savings protected in an FDIC insured account? Do I have the proper health insurance that matches my needs? Does my car insurance make sense for my situation? Is life insurance right for me?
- Financial Future: Am I investing money for my long-term life goals? Is debt holding me back from achieving my financial goals?
If you feel good about each of these prompts, then carry on with your SMART goal as is. But, if you weren’t feeling so sure about one or two of these prompts, then you’ll need to revise your goals and set something up that is related to a higher priority item. Or, you can choose to stick with two or three financial resolutions! Taking just 30 minutes to check-in with your financial resolution for the new year could put you on the path to financial security, so make sure to schedule your check-in ASAP!