2020 was unprecedented, at least in our lifetime. It taught us about the importance of having a financial plan and how financial stress can affect our overall health. It highlighted the need for an emergency financial plan for rainy days and showed us how critical it is to have some cash set aside in case we lose our job, without putting at risk our long term financial goals. You may be thinking – “Oh no, I have not gotten started on this one yet.” Well, January is still around and it is the best month to get started, so let’s do it!
Writing down your financial ideas and goals for 2021 will help you work towards your financial plan for the year. To do so, it may be a good idea to explore the following questions: Is there a dream goal that keeps coming up? Has the thought of saving more recently crossed your mind? Think about your ideas for 2021. How do you want to feel about your finances at the end of the year? Realize that getting control of your finances is important and is one of the best things you can do for yourself. We know it can feel overwhelming to get started. To help you on this journey, we have put together 7 tips for you to organize and materialize your financial objectives:
Define SMART financial goals.
Turn your goals into an action plan.
Stay committed to your plan.
Invest in financial education.
Track your progress and know your net worth.
Get an accountability partner or two.
Let’s now roll up our sleeves and get to work.
1. Define SMART financial goals
The first step is to come up with SMART financial goals. Break them down into goals for the next 6 to 12 months (short term), 1-5 years (medium term) and more than 5 years (long term).
SMART means that your goals should be:
–Specific: this makes your goals feel more tangible and creates clarity. Think about the following questions: What specific amount are you saving each month? What % of your salary is going directly into your investing account every month? With this in mind you can conclude for example: “I will invest 50€ every month.”
–Measurable: putting a number to your goal makes it measurable and allows you to evaluate your progress. For example, if your goal is “I want to save 600€ this year,” you have something to measure your progress against every month.
-Achievable: define goals that are realistic and achievable. Start with small steps and get those accomplished first. They can be stretch goals, of course, but they must be realistic, so that at the end of the year you can give yourself a pat on the back. Progress brings fulfillment!
–Relevant: What are the most relevant goals for you? Is it having eventually saved 3 months of your salary, so you have an emergency back up plan? Maybe you already have your emergency plan figured out, so investing may be most relevant for you now. Perhaps it is to automate savings. Saving for your retirement is undoubtedly one of the most intelligent and relevant decisions!
–Time-bound: give your goal an end date and hold yourself accountable to it.
2. Turn your goals into an action plan