If you’re thinking about setting financial goals, congratulations!
Setting goals is one of the best ways to personally grow. It’s a great reflection exercise, too. You want to implement as much reflection as possible in order to do the best you can to shoot for growth.
Here’s how to set financial goals for 2021 (despite the havoc COVID-19 may have wreaked on your finances in 2020)!
Why it’s Important to Set Financial Goals
It’s important to outline your financial goals, especially after a year like 2020. Here’s why.
Reason 1: You might still be hurting from a financial setback.
Did you have a financial setback this year? That’s enough of a reason to sit down and pen some goals. Whether you’ve found yourself the victim of a job loss, reduced income or a demotion due to your company’s financial difficulties or another reason, check out the steps outlined below to organize your financial goals.
Reason 2: You may find yourself in a precarious financial situation.
What if you’re facing more than just a small financial setback or situation? What if you just do not have enough income? This could occur three ways:
- The job loss or reduced income we talked about in Reason No. 1 might have found you and it’s difficult to save enough to come back from that.
- Are you spending too much money? Have you continued to charge your credit card and it’s slowly mounting into a situation you can’t crawl out of? Believe it or not, you can still find yourself in a financially difficult situation even if you’re bringing home money every month through your job.
- You could face both issues — spending more than you can afford and a reduction in income. Overspending and a reduction in your income can quickly become a recipe for disaster.
If you feel like 2020 has made you take a tumble in more ways than one, it’s time to make a change.
Reason 3: You simply want to have a better year than last year.
The year 2020 was a doozy for a lot of financial reasons, but you may not have even really taken a tumble. Maybe you want to __________:
- Save for a vacation.
- Start saving for higher education for your kids.
- Boost your emergency fund.
- Get life insurance, disability insurance or another type of just-in-case insurance.
- Save more for retirement.
- Pay yourself first.
However you fill in the blank, you want to set financial goals for whatever it may be.
Questions to Ask Yourself
Check out three questions to ask yourself before you launch into your newfound financial goals for 2021.
Question 1: What do you really want?
Sounds philosophical, doesn’t it? A question akin to “Why are you here?”
It goes beyond the “how much stuff can I accumulate?” question and drives to the heart of what you really want your money to do for you. Do you want it to help you save enough for retirement so you can live comfortably? Do you want it to purchase a beautiful home that you’ll admire every time you look back at it as you leave your driveway? Do you want your money to earn interest on the interest it’s already earned you?
Question 2: What’s the easiest way to get there?
We all like life easy. So make the route you get to your financial goals for 2021 easy. What’s the very easiest, most transparent way forward to get to what you really want? Answer it quickly, without thinking!
Let’s say you want to pay off $15,000 you owe your brother.
Your bullet answer is: Break up the $15,000 by paying $1,250 every month till the end of next year.
Whatever it is, figure out what the shortest answer will be — don’t overthink it.
Question 3: Can you commit?
In your heart of hearts, do you know you can commit to your bullet method? Do you know that you have it in you to commit to the easiest way you identified?
How to Set Larger Financial Goals Post-COVID-19
Now, what about larger goals? What about the “I want to save for retirement” goals? Good question. Here’s how to do it (you’ll be amazed at how simple it really is)!
Step 1: Outline your goals.
Write down your goals — actually on paper — and put them somewhere where you can see them every day. That helps you visualize them, hone in on them and commit to them in your head even more.
The coolest thing about financial goals is that they don’t have to look like anyone else’s goals — they can be yours all on your own. Whether you’d like to achieve really big things or
Step 2: Tackle SMART goals.
Have you ever heard of SMART goals? It’s an acronym that stands for Specific, Measurable, Achievable, Relevant and Time-based. Each part of SMART goals helps you achieve them and helps you make sure they’re not vague or unattainable.
Here’s a quick definition of each part of the acronym and how you can make them work in your favor, using getting a new job as your plan for maximizing your financial goals for 2021.
1. S: Specific
Make sure your goal is super specific. The more abundantly clear you can make your goal feel to you, the better off you’ll be.
Example: “I want to earn a position as a senior project engineer at my company.”
2. M: Measurable
You’ve GOT to measure your progress. Otherwise, how will you know you’re successfully moving toward and achieving your goals? Measuring your goals and your progress also gives you more momentum and motivation to keep moving forward.
Example: “I will apply to two open positions for senior project engineer at my company by the end of the month.”
3. A: Achievable
Is it possible to achieve your goal? Let’s say you set a goal of applying for the new job by the end of the week. Is that actually achievable? (Remember, you still have to get your resume in order, ask for recommendations and more. Setting goals you can reasonably accomplish within a certain timeframe keeps you motivated and focused. Decide whether you can actually achieve your goals now or if you need to take additional steps to prepare yourself to meet your achievable goals.
It’s kind of like leaving yourself a trail of breadcrumbs toward your goals.
Example: “I will update my resume this week so I can apply to the two open positions as senior project engineer at my company by the end of the month.”
4. R: Relevant
Will your smaller goals actually help you achieve your financial goals? For example, what if the job you’re considering applying for doesn’t help your broader goal of making more money in 2021? What if it’s a lateral move instead of an increase in pay? You might want to reconsider your goal, or at least articulate why the goal is important to you. Obviously, you can pinpoint lots of other reasons why a goal is worth it, even if it doesn’t offer a lot of financial incentive: It could offer you a chance to broaden your skill set, an opportunity to work with a team you find exciting, an increase in responsibility, etc.
Example: “I know from my research that both open positions in my company as senior project engineer come with a salary about five percent over my current earnings. I called the HR representative in charge of the job listing to verify.”
5. T: Time-based
When do you plan to achieve your goals? A goal with no end date doesn’t help you because you’ll just spin your wheels and might never actually accomplish it. For example, you might give yourself six months to achieve your goal of becoming a senior project engineer.
What happens if you don’t achieve your goals in your specified amount of time? Look over the other parts of the acronym. Maybe they’re not specific, measurable, achievable or relevant enough. Maybe you don’t have enough experience or the right skillset to become a senior project engineer.
Example: “To achieve my goal of becoming a senior project engineer, I will update my resume, apply, interview and accept my new job — all in six months.”
Got your SMART goals written down? Great! Check out some other bonus tips.
Tip 1: Budget for things like life insurance.
Don’t forget the adulting part of life, which requires you to do things like get life insurance, create a will, organize your disability insurance and even get your end-of-life plans in order. Stick those into your goals for the next year to make sure you’re set for life.
Tip 2: Analyze what worked and what didn’t during COVID-19.
Did your family get a little too addicted to Doordash’s convenience and rely on it for every meal? Did you spend more than you thought you would on takeout and other things? Analyze your behaviors during COVID-19 and decide whether you should continue making those kinds of financial decisions. And if you did things better than ever, keep up the good work. For example, you really may have hunkered down — working from home, saving money by not going out to eat or spending extra on other unnecessary things.
Tip 3: Get Facet Wealth on your side.
Facet Wealth works with employers to make financial planning accessible and affordable to all employees, regardless of net worth.
It’s quick and easy to get started with Facet Wealth. Once you give your basic information, Facet Wealth pairs you with the right CFP® professional for an initial complimentary financial review — it takes less than an hour!
Set Your Financial Goals Before December 31
Don’t wait till January 1 to get your financial house in order. It’s best to look at what your goals are before then so you have a strategic plan in place well before the new year. It seems like it’s possible to lose momentum when you hit January 1 and you’re already behind.
Get in gear early and make a plan. You’ll be glad you did early so you’re prepared for anything — even a pandemic.
Melissa Brock is a 12-year veteran of college admission, founder of College Money Tips and Money editor at Benzinga. She loves helping families navigate their finances and the college search process. Check out her free essential timeline and checklist for the college search!