How did that happen? A new year is upon us again.
As we enter 2018, most of us are resolving to work out more (darn those holiday treats) and to get ourselves into better financial shape. Although we can’t eliminate those holiday pounds, we can help with your financial goals.
No matter what your financial resolution for 2018 — whether it’s to get out of debt, travel, buy a house, or just save more — here are five steps to help you actually reach it.
IDENTIFY YOUR GOALS
You can’t reach your goals this year if you don’t know what they are. “Take some time to think about which goals are most important to you,” says Bill Taylor, vice president of financial planning for Northwestern Mutual. “It might be taking that trip to Disney, paying off credit card debt, buying your dream home or making sure you’re saving enough for retirement. Everyone’s situation is different.”
Whether your goal is something you want to do tomorrow or 20 years from now, write it down on paper. “You’re more likely to achieve goals if they’re written down,” says Taylor.
CREATE A BUDGET AND PLAN
Now, it’s time to prioritize. The reality is that most people can’t buy whatever they want whenever they want. (We wish we could tell you that, but you know as well as we do that that’s how people get into too much debt.) But that doesn’t mean you can’t do the things that really matter to you. You just have to figure out what those are.
Review your list of goals and start researching what reaching those goals will cost. (A financial planner or professional can be a big help here.)
Now it’s time to budget. You need to look at how much money is coming in each month and how much is going out. This is where you’ll make adjustments and prioritize how you’ll spend your money on a monthly basis. Make sure you are budgeting for the things you really enjoy in life, and get rid of any expenses that don’t add much. That way you’ll have more to put toward your goals.
Having a financial plan helps you prioritize for the long-term. “Spending money without a plan is like getting in the car and driving somewhere you that have never been without a map. You’ll get somewhere, but it likely won’t be where you wanted to go,” Taylor says. The plan is your roadmap. For instance, let’s say you have a goal to pay off $10,000 in debt. Your plan may be to dedicate $1,000 each month this year to pay off the debt quickly. Then when you finish paying the debt, you’ll start saving more for retirement and setting aside money for your dream vacation.
PROTECT YOUR DREAMS
No matter your financial goals, make sure you’re setting aside funds in case of an emergency. Life is messy, and there a lot of unexpected things could derail those goals: losing a job, getting injured or getting diagnosed with an illness or maybe your car breaks down again and you need to suddenly buy a new one.
“It’s not fun to talk about, but bad things happen,” says Taylor. “If you don’t have an emergency fund or things like life insurance or disability insurance, you or your family could end up resorting to credit cards when you need money. That can start a downward spiral and could very quickly derail your goals.”
SAVE FOR THE FUTURE
Even as you work to hit this year’s financial goals, don’t forget about the big things you want someday, like retirement or a new house. “If you’re offered a 401(k) at work, make sure you’re contributing enough to at least get any match that your company offers,” Taylor says. Then, consider saving more for long-term goals.
While you create a budget, start paying down debt, planning for the things that can go wrong and saving for your future, allow yourself to enjoy the things that matter to you today.
For instance, maybe you can’t afford to go out to eat five nights a week. But if that’s important to you, make sure you carve out some money to go out at least once a week. (You may find that it becomes more special and that you enjoy it more because you know you can afford it.)
Reaching your financial goals means spending your money on what’s most important to you, whether that’s socking away money for things 15 or 20 years away or doing the things that really matter to you now.
Make sure you have the things you really enjoy in life, and get rid of the expenses that don’t add much. That way you’ll have more to put toward your goals.