Another year, another dollar! Well, that’s how it should be! Every year we should be getting better and better in our financial situation. In order to do that, we need to set realistic goals. This applies to all area of life, not just finances. Setting goals and working towards them allows everyone the opportunity to improve their life. If you’ve never set money goals before, why not start now? I’m sharing 5 money goals to set for the new year so you can start reaching the life of your dreams!
5 Money Goals to Set for the New Year
#1 Start Investing on a Small Scale
There’s no doubt about it – investing is one of the best ways to build wealth over the course of time. The rate of return you get from the stock market is 2-8x better than what you’d get from a regular savings account or CD. With that being said, you have no time to waste!
If the thought of investing in the stock market terrifies you, don’t worry…it’s easier than you think to get started! I would recommend opening an account with Betterment (you get a year free of management fees for signing up with my link). Betterment allows you to determine what you want to save for and when you want to reach the goal.
Once your goal is set with Betterment, the platform will show you how much you need to invest each month to reach that goal. This gives you line of sight into what you should invest. Whether you can afford the amount or not, at least you know what to expect! Betterment invests your money for you, based on your goal. It picks the appropriate funds to help you reach your goals.
You can leverage that platform to start monitoring the market, researching the funds they invest you in and open multiple accounts for different goals. Investing doesn’t have to be scary, but you do need to take the leap and get started.
#2 Increase Your 401k or IRA Contribution
Saving for retirement through a 401k plan or IRA is another form of investing! If you’re saving for retirement, you’re an investor! However, there is likely a need for you to increase your contribution rate. I probably don’t have to tell you that at minimum, you should be contributing up to what your employer will match.
However, your employer contribution shouldn’t be your maximum. In fact, your contribution plus employer match is not enough to ensure you’re completely secure at retirement. I’m not saying jump the gun and contribute the annual maximum (currently at $19,500), but you should strive to reach that maximum over time.
If you don’t have a 401k through your employer, you’re not out of luck. An IRA is your next best option and it requires nothing to get started. Again, you can open an IRA with Betterment (aren’t they great?), but many financial institutions offer them. The annual limit to contribute to an IRA is currently $6000. Don’t forget, you can have both an IRA and a 401k at the same time!
#3 Finally Master Your Budget
If you’ve been following me for awhile now, then you’ll know just how important I believe budgeting is for financial success. A budget is a tool that shows you what should be happening with your money. Granted, you’re the user of that tool. This means that the tool doesn’t do its job unless you do.
A top priority for next year (or any year, for that matter) should be mastering that tool (AKA your budget). Get into a good rhythm with your income and spending. Control yourself when it comes to buying things you don’t need. Work towards a profit every month and use that profit to help you reach your goals.
To master your budget requires you to track your spending. There’s no other way to know if you’re sticking to the budget you’ve created. Start trying different tracking methods. You can physically write your spending, use an app or enter your spending into an excel spreadsheet. Building the habit is most important, so find what works best for you.
#4 Save 1, 3- or 6-Months’ Worth of Expenses
Everyone is at a different stage of their financial success journey. Because of that, you don’t want to stretch yourself too thin, or focus more time than necessary working towards a goal. If you don’t have anything or much saved, make it a goal to save one month’s worth of expenses. This is a realistic and achievable goal.
If you don’t have debt, or you have a handle on it, your next goal should be to save 3 months’ worth of expenses. Depending on how much you currently have saved, this could take some time. That’s perfectly fine. You’ll feel so much more secure when you reach this goal. It’s worth the time it takes to achieve it.
Rounding out the milestones is 6 months’ worth of expenses. Having this number in your savings, as your true emergency fund, will cover you if something major were to happen. There’s no better feeling than having your emergency savings fully funded. This should be a goal for everyone. You can even take it a step further and save 1 years’ worth of expenses.
#5 Stop Accumulating Debt and Start Paying it Down
Debt is draining. Debt is heavy. Debt is expensive. Debt is something we should all be working to get rid of. Just think about how much you currently send to your debt payments every month. Imagine if that money was back in your pocket. Imagine if that money was allocated to the things you want to achieve!
That’s why it’s critical to stop accumulating debt (first and foremost) and then start paying it down. The goal is to be debt-free. It may seem like decades away, but that doesn’t mean you don’t work towards it anyways. You never know what could happen in the future to help you pay it off faster. Do the right things with your money, and the right things tend to work out in assistance.
Once you’ve stopped accumulating debt or using credit cards for spending, you can craft a plan to help you pay it off. I personally recommend the snowball method. However, there are a few debt repayment strategies that can be used. The goal is to be debt-free and to get there the smartest way possible.
The money goals listed above are things everyone can and should work towards. The goals will help anyone improve their financial situation, no matter where they currently stand. Make it a point to work towards one or all of the goals on this list. Trust me, you’ll thank me for it later! What money goals do you have set for the new year? What helps you stay motivated? Drop a comment below to share your thoughts!