Regular MM blogger Finance Dee gives her top tips for setting New Year’s financial goals
Setting Financial Goals for the New Year
I am a big believer in setting goals or intentions every single year. It’s not that I subscribe to the “new year, new me” concept, but goal setting is extremely useful in helping to put a plan together.
Moreover, studies have shown that goal-setting is linked to success1, self-confidence, motivation and autonomy2.
With that being said, let’s talk about some potential financial ambitions you could add to your personal 2022 goals.
Pay down consumer debt
Whether your debt is in the form of loans or credit cards or a bit of both, debt is something that we should aim to get rid of for the sake of our pockets and our minds.
There are two general approaches to paying down debt: snowballing, where you pay off the smallest debt first in full and work your way up to the largest debt, and avalanching, where you pay off the debt with the highest interest rate first and work your way down to the lowest interest rate.
Either approach works, but the key is to set a strategy, as achieving mini goals along the journey is what will help keep you motivated.
Build up a sufficient emergency fund
Unexpected expenses such as the car breaking down or a pipe bursting at home can happen to anyone, so it’s important to build up an emergency fund to cushion the blow when they do occur.
Most experts recommend having anything from 3-6 months’ worth of your monthly expenses set aside to cover not only emergencies but also to give you something to live on if you find yourself out of work.
It’s important to remember that emergency funds need to be easily accessible, and therefore it is recommended to have this saved in easy accessible savings account.
Read at least one personal finance book
If you’ve never read a personal finance book, why not try one in 2022? You can never know too much about managing your money and they can offer a great source of helpful tips and advice.
Even if you’ve read quite a few, I have found there’s always more to learn or it can serve as a nice refresher.
If you are looking for book recommendations, I did a YouTube video on my favourite personal finance books that I think are a great starting place no matter where you are on your journey.
Set a budget/spending plan for the first three months of the year
No matter how you cut it, budgeting is thefoundation of good money management. If the word ‘budget’ makes your skin crawl, think of it more as a conscious spending plan, or in other words, deciding where all your pounds are going to go every month.
By setting a budget for the first three months instead of, say, just for a month, you are consciously deciding to take a long-term approach to your finances, which is the most sensible approach.
For instance, if you know you’re saving up for a big purchase such as a home, a car, or even a holiday, budgeting ahead helps you to align your finances to achieve your goals.
Schedule regular progress reviews
If you have a set budget and financial goals, this should be an easy goal to achieve. Every month, set a date with yourself and/or your partner to review your finances and assess whether it aligns with your goals.
Truly, this does not need to be a tense discussion or even remotely unpleasant. In fact, it can be a great time to reflect, celebrate your accomplishments and to figure what needs tweaking to get you closer to your goals.