How to Set Financial Goals for the New Year

Goal setting is an excellent thing to do before the new year begins; it is a sort of roadmap that will guide you to your desired destination.

For many, a new year is a fresh start that motivates you to get back on track with your goals. The beginning of the year usually comes with a resolve to do better and a renewed hope to try again; this is why many people set new year’s resolutions.

However, if there are no goals set in place and no plan to follow through on those goals, the resolutions become wishful thinking. This goal-setting process will help set you up for success this new year.

What are Financial Goals?

Financial goals are the milestones you want your money to cover at a specific time. They are based on a specific need or want you may have in the future.

Financial goals can be short-term, mid-term, or long-term. For example, saving for retirement is a long-term financial goal, while saving for a new laptop can be a short-term goal.

Examples of Financial Goals:

• Increasing your income
• Paying off debt
• Saving for a vacation
• Purchasing a home
• Starting a business
• Saving for your child’s college fund
• Maxing out your RRSP contribution

As you can see from the examples above, your financial goals do not have to be tied to a purchase.

Key Features of Financial Goals

When setting financial goals, or any goals, you have to consider the acronym SMART, which stands for Specific, Measurable, Achievable, Realistic, and Time-bound.

Consider these two goal examples:

1. Build up my emergency fund
2. Save $10,000 in my emergency fund by December 31st by contributing $833 to my savings account each month

The second goal incorporates the SMART criteria in that it is:

• Specific: It defines an exact amount of $10,000 and its purpose, which is an emergency fund.

• Measurable: Since an exact amount is specified, you can calculate how much you need to save each month or each week to achieve $10,000 by your specified time

• Achievable: Look at your income and current lifestyle to determine what is achievable while setting your goal. Your goal should make you feel challenged but not stressed. Make sure it is within your means to achieve it.

• Realistic: A realistic goal is within reach and relevant to your priorities. If contributing $833 is not realistic with your current budget, achieving that goal will be challenging.

• Time-bound: The goal has a specific deadline of December 31st. It should also have a specific start date to create that sense of urgency. Having an open-ended goal with no defined deadline makes it easy to stray from the plan and lose momentum.

How to Set Financial Goals

1. Define your why

While you may be feeling inspired and motivated when setting your financial goals, it can be hard to maintain those feelings throughout the year. Defining your why will keep you going when the motivation you started with fades away. 

If your goal is to save for retirement, determine why that is important to you and write it down. On the days that you want to give up on your goal reading your why will get you back on track and remind you of the reason you set out to achieve the goal in the first place.

2. Focus on the actions, not the deadline

The goal deadline, especially for long-term goals, can seem so far away that it is easy to delay your progress.

For example, if your retirement age is in 40 years, you can easily decide to start contributing to your retirement account when it gets closer. The risk is that you may forget to make contributions until it is too late.

While the deadline is important when setting your goal, give more attention to the actions you need to take each day to achieve your goal.

Accomplishing the smaller actions you have set for yourself brings a sense of fulfillment that can keep you going until you achieve your goal.

3. Monitor your progress

It is important to monitor your progress for 2 main reasons:

• Celebrating your wins: monitoring your progress often can help you see what you have achieved so far. Celebrating what you have accomplished motivates you to keep going. It is easier to forge ahead when you can see the results of your hard work.

   

• Strategizing: Life circumstances can change over the course of the year. When you monitor your progress, you can see what works and what does not, then you can make adjustments accordingly.

Set an appointment with yourself each month or quarter to look at your results. Repeat what is working and get rid of what is delaying you. These habits will help you to stick to your budget.

4. Seek help from professionals

Financial Advisors are a great resource when setting your financial goals. Schedule an appointment with a Financial Advisor to discuss your goals and know your options.

Professionals may direct you to more resources, better investment opportunities, and tools and resources to support you. They can help shorten your goal deadline in the long run.

At Cambrian, our members are our priority. We want to support our members’ financial well-being by ensuring they are well informed and aware of all the resources available to them.

Always keep learning. The best way to achieve your goals is to seek out the knowledge you need to make better decisions. Resources like our Financial Literacy Blog are a great place to start building your financial resilience and positioning yourself to succeed.