Welcome to a brand-new year, full of hope, opportunity and adventure (well, we can hope). Although it’s always a good time to set and work towards your financial goals, there’s something extra special about doing it at the beginning of each new year.
It’s a time to reflect on all that’s happened and think about what you want to achieve over the next few years. As I heard the other day when Spotify helped Justin Bieber to worm his way into my brain, life is worth living, and I hope you make the most of the moments you are given in 2021.
Reflecting back on 2020
To kick your financial goal setting process off, it’s time to reflect back to the year that was 2020 and dig out your goals from the beginning of the year. With the unexpected events presented by 2020, many of our goals got pushed into the back of the drawer or were just completely unfeasible following the events that transpired throughout the year.
Six Sentences About My Finances in 2020 (sourced from YearCompass)
- The wisest decision I made…
- The biggest lesson I learned…
- The biggest risk I took…
- The biggest surprise of the year…
- The most important thing I did for others…
- The biggest thing I completed…
Six Questions About My Finances During 2020 (sourced from YearCompass)
- What are you most proud of?
- Who are the three people who influenced you the most?
- Who are the three people you influenced the most?
- What were you not able to accomplish?
- What is the best thing you have discovered about yourself?
- What are you most grateful for?
Creating your goals & action plan
Now that you’ve reflected on your goals from the last year, it’s time to use that as a springboard to get cracking with your goals for 2021. If you have multiple things you need/want to save for and pay off, work out what is the most important and list them in order.
You need to be clear on what your most pressing goal is. I tend to group my financial goals into short (up to a year), intermediate (1-5 years) and long-term (5 yrs upwards). Timeframes are always individual, but I always suggest only investing your money if it’s a long-term goal; it’s not where your holiday money or emergency fund goes.
What does the end result look like and mean to you? Write them down somewhere you’ll look on a regular basis (I’ve stuck them on my bathroom wall before). If your goal is to save $1,000 by Christmas time, it’s a good idea to break that down over the next 12 months, and check in on your progress every month. As they repeatedly tell you at school, make sure your goals are SMART goals!
Take the time now to break down your goals into smaller and more achievable steps, and put time constraints around them.
- Short-term goals may be saving up for a short course you want to take, a new phone or a weekend away.
- Intermediate goals might be saving up for an overseas holiday, building an emergency fund or paying off your credit card debt.
- A long-term goal could be buying a house down the track or ensuring a comfortable retirement. Make sure your goals are achievable for the given timeframe.
Automate, automate, automate
Automate as much of your financial plan as possible by setting up automatic transactions in your bank account when your paycheck comes in and creating a monthly event in the calendar to purchase the next ETF/review your budget etc.
Get accountable for your success
It’s not enough to just write your goals down and put together a plan to achieve them, you need to work out how you’re going to keep yourself accountable for reaching them. Create strategies to keep on top of and check in with your plan on a regular basis (e.g. budgeting app, Google Sheets, calendar alerts, monthly review with a trusted friend/family member, etc.).
However, as a One Republic song keeps reminding me, life’s what happens when you’re making plans. It can be so easy to get caught up in the busyness of our day to day life and chasing our goals, that we can forget to truly live in the moment. If this year taught us anything, it’s that life is precious and things can change in an instant, so go live your one wild life!