This time of year is often the peak for aggressively striving towards goals—more specifically, our New Year’s resolutions. Among those, weight loss and finances tend to be some of the most popular. Just think: this could be the year you finally pay off all your debt, your credit score goes up, and you start building a savings and contributing to a retirement fund!
If the idea of doing any of that seems overwhelming and unattainable, don’t worry—you’re not alone. Sometimes, we just need to practice healthier habits, or hone in on our money goals, which can be easily done with breaking down our money goals into little baby steps.
Regardless of where you are on your financial journey, if you’re just learning how to save and plan for retirement or have been aggressively shelling away your paychecks for years, there are always ways we can improve our relationship with money and how we save and plan for the future. Keep on reading to learn the 8 money goals to strive for this year, and how to actually achieve them.
Money goals to strive for this year:
1. Finally become debt-free
When people hear the term “debt-free,” they tend to think it means having zero debt—which isn’t always the case. Contrary to popular belief, not all debt is bad debt. Yes, that’s correct: there is good debt and bad debt. Bad debt is debt that doesn’t provide you with any financial return. Credit card debt is an example of bad debt because it typically has high interest rates, penalty fees, and no equity. Good debt is debt that is an asset that can provide a financial return or be leveraged/sold at any time. A home mortgage is an example of good debt because it can appreciate in value over time, be flipped and sold for a profit, or even rented out to generate income.
This year, make it a goal to get rid of all your bad debt as a path to an overall goal of becoming totally debt-free. Breaking everything down into and taking baby steps is key to attaining this.
Take the time to sit down, write out, and calculate all your debt, including the exact amount you owe, interest rates, and your monthly payments. Then, calculate your salary and living expenses, and how much debt is taking from that. You’ll now have a clear picture of what you’re spending paying off your debt, and a better idea of what to do next.
One easy thing you can do is allocate a certain percentage of your income and put it towards your debt. Percentage is the keyword here. Taking out a certain percentage rather than the dollar amount won’t affect the money you use for your bills or emergencies, and if you have a job that doesn’t provide you a set, steady income, this will also ensure that you’re taking out an equal amount each time, regardless of pay.
If possible, focus on paying off any “bad” debt you may have. You can also consider consolidating all your debt, which can help lower interest rates and relieve any worries or stress you might have about missing any payments.
2. Have and build an emergency fund
An emergency fund is a financial safety net for future mishaps or unexpected expenses, and if there’s anything the last two years taught us, it’s just how rapidly things can change and turn upside down. The start of the pandemic reiterated the fact that having money for a rainy day is crucial, because life throws us curveballs sometimes.
A good goal to start with is to aim for building enough savings that would get you through at least 3 months if there was a sudden loss of income. Take inventory of what your monthly income and living expenses are, then calculate how much money you would need to get through 90 days. From there, start formulating a plan to to achieve it. You can try setting depositing a certain percentage of your income, or a fixed dollar amount directly into a savings account every week. Once you’ve achieved that goal, then focus on saving up for an another 3 months, which will give you a savings account that would cover you for 6 months in case of an emergency. After that, work up to having enough savings to get you through a whole year. You’ll be amazed at the peace of mind having an emergency fund will give you.
Once you’ve saved up enough for a year, you can start looking into investing. Having investments will give you the chance to grow your money, and will also provide a last-ditch source of income that can be liquidated for a rainy day if your savings falls short. This is only if you’ve saved up enough in savings to last you at least a year, though; there’s a chance you’d have to pay income taxes if you have to liquidate any investments, and since the stock market fluctuates, you run the risk of being in the red for some time. TDAmeritrade, Robinhood, Webull, and Fidelity are all stock platforms that you can use to build an investment portfolio right from your own computer. Make sure you do your research and speak to a professional before investing.
3. Make and actually stick to a budget
It’s easy to get caught up living beyond your means, regardless of financial situation and/or income. Which is why having a budget and sticking to it is so helpful. It also inadvertently forces us to practice smart spending (like buying only necessities), and shows us where our money goes.
The first thing you should do is add up the cost of all your living expenses and compare it with your income. From there, you can then figure out what you need to set aside in order to contribute to your savings. After that, look at the other places you’re spending money—aka “lifestyle” expenses or “extras.” How much money is being deducted from your income and savings because of your living expenses alone? How much money is your lifestyle truly costing you? How can you pay your living expenses and contribute to your emergency fund? This will give you an idea of what you really can and can’t afford.
Look at all your bills and the areas you may be splurging a bit, and see if there are any places you can cut back. Maybe you don’t need to pay for cable and 5 different streaming services and can instead pay for one or the other. If you get coffee or takeout a lot, try making coffee and cooking at home more. Instead of going bar hopping with your BFF’s Saturday night, host a get together at your home. Switching up little lifestyle habits can help you save tons of money in the long run.
Tips for Budgeting:
- If you can’t afford it outright, don’t buy it
- Small changes in your daily routines and habits can help you save
- Stop using your credit card to cover things you can’t afford
- A good trick for online shopping is putting things in a shopping cart, wishlist, or “save for later” category. This lets your subconscious know that the items are still there and set aside, and that you haven’t taken them off the table yet
- Before you buy, ask yourself if this is something you really need, and why you want to make this purchase
- Take out cash and leave your credit card at home
- Downsize your living space and sell any home items you don’t need
4. Practice discipline with purchases
Instant gratification is overrated—do you know how rewarding and elating it feels to receive something you’ve been coveting for a while, waiting until just the right moment to buy? The truth is, none of us need to buy something the second we see it and decide we want it. Focus on practicing a little discipline with purchases, and not giving in to those impulse buys. You can do this by removing any saved credit cards from all websites to remove that quick temptation (bye-bye, Amazon 1-Click Buy), start waiting until things are on sale, and even looking for different deals during the year. For example: TV’s are usually on sale during football season leading up to the SuperBowl, and beauty and skincare products are usually on sale from Black Friday through the end of December or beginning of January.
If you’re having a difficult time being disciplined, close your eyes, and think about how much more exciting it’ll be when you do finally get something for yourself or for fun.
5. Stop making minimum payments on your credit card
Making a one-time minimum payment is akin to the kiss of death—once you do that, you’ll forever be playing a game of catch-up, and your debt will inflate, and your bills will escape you. Paying off the minimum balance may seem and feel like you’re saving money, but you’re actually spending more money in the long run. You’re not only adding to your debt, the balance that wasn’t paid off that rolls into the next month will be applied with interest. Plus, you could end up paying off that card for years. You’re going to pay back that money one way or another; it’s better to just get it over with.
If you have any existing credit card balances, make sure you factor that into your debt and work towards paying it off. You can also try and find a card with a lower spending limit that will help you stay within your budget, or even start leaving your credit card at home and carrying cash around with you. Make it a priority to pay off your credit cards every month, and stick to your budget so you can reach that goal. Start making bigger credit card payments to get yourself out of that never-ending money pit, and get focused on paying off your existing debt before adding more.
6. Create a retirement plan and contribute to it
Time is a mystery, and the older we get, the faster it seems to go by. Which is why it’s never too early to start investing for the future. It’s important to create a retirement plan now and set yourself up to living life to the fullest. The three main types of retirement portfolios are a Traditional IRA, Roth IRA, and 401(k).
A Traditional IRA allows you to use all contributions as tax write-offs. This is beneficial for those who make a lot of money and need all the breaks they can get on paying taxes while investing for their future. However, in the future, when you cash-out, you will have to pay taxes on that money as income.
A Roth IRA is totally tax-free when you finally withdraw it in the future, which means all the money you’ve accumulated over the years won’t be taxed as income. The only downside is you cannot write-off any contributions to it now while you’re young to help with your taxes.
A 401(k) is most popular with jobs, since companies will help contribute to it. You can talk to your employer about retirement options. Some jobs offer their own version of a 401(k) or have pensions for retirement.
There is no set amount you need to contribute to them to get started, and you can add as much or as little as you like as you go. It’s all about doing whatever works for you! If you’re unsure of where to start, speak to a financial advisor.
7. Set two types of money goals
Goals are essential because they motivate us and give us something to strive for. When it comes to achieving our financial goals, we must set two kinds: one long-term money goal, and short-term money goals. Short-term money goals are the baby steps needed to get to the long-term goal, and they also make the possibility of achieving that bigger money goal more realistic. When one big goal is broken down, it isn’t so overwhelming, and helps create a path and plan in order to get there.
How much money would you like to make? What kind of lifestyle do you want, and how much money is needed in order to get there? Is there a set amount of money that you’d like to have in savings by the end of this year? In the next six months? There is no right or wrong answer. Sit quietly and think about it; allow the answer to come to you. Your goal can be as big or as little as you like—nothing is impossible! Once you’ve figured out what your long-term money goal is, write it down on a blank piece of paper. Then, using the tips mentioned above, break down the steps you can take to get there. Maybe it’s cutting back on going out, or putting more money out of your paycheck into savings. It can even be creating your own little side hustle to add an extra stream of revenue. Laying out your plans and steps on a piece of paper will also help you hold yourself accountable when it comes to reaching your money goals.
8. Meet with a financial advisor
If you don’t do anything else, take the time one day to sit down and meet with a financial advisor. Ask them about whatever questions you have for retirement and investing, and what you can start doing now to save up for the future. Talk to them about your existing debt or any other financial concerns you might have; mention your money goals and ask how you can get there. You don’t have to listen to everything they say and take their word as Gospel, but getting a professional opinion is a good place to start. Plus, you can always seek out a second opinion if you want to be extra thorough and take initiative with your money.
DISCLAIMER:
This article is not financial advice. We, at Flawless World, are not financial advisors. The ideas outlined in this article are strictly personal preferences and opinions, and should not be taken as financial advice or instruction.
