Although you can create and start working towards a goal on any of the 365 days in the year, there’s something cathartic about taking time at the end of every year to reflect on the year that’s been and where you want to direct your attention in the following year.
The goal setting process can be enjoyable! To get you started, here are some reflection questions and tips for setting goals for a strong 2022!
Reflecting back on 2021
To kick your financial goal setting process off, it’s a good opportunity to reflect back on the year that has just passed and dig out your goals from the beginning of the year.
With the unexpected events presented by the past two years, many of our goals got pushed into the back of the drawer or were just completely infeasible following the events that transpired throughout the year. These goals are still worth looking at, as they may be something you can incorporate into your goals for 2022.
Here are some thought-starter questions to help you in reflecting on your finances over the past year (sourced from YearCompass).
Six sentences about your finances in 2021
- 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 your finances during 2021
- What am I most proud of?
- Who are the three people who influenced me the most?
- Who are the three people I influenced the most?
- What was I not able to accomplish?
- What is the best thing that I have discovered about myself?
- What am I most grateful for?
What can you control in 2022?
With the changing restrictions and tubulent times of Australia’s pandemic response, it’s important to reduce stress by considering what you can and can’t control, and focusing on dealing with the matters that fall into the “can control” basket.
Sadly, there’s so much happening in the world that you can’t control right now, so you need to tune out some of that noise and focus on what’s in front of you.
Action tip: Identify what you can and can’t control when it comes to your money and investing. Focus your efforts on setting goals that allow you to more effectively control the outcome. For example, your investment goals each year may focus on what you’re adding to your portfolio or your money and how it’s invested, instead of focusing on more unpredictable elements like investment returns.
Before setting your financial goals for 2022, let’s talk about your foundation, an emergency fund.
Have you sorted out your safety net (emergency fund)?
COVID-19 has demonstrated just how uncertain the future is and the importance of being flexible. One way to deal with this is by building your financial safety net.
Your emergency fund is your financial runway for whenever you run into unexpected trouble, and need to cover some financial costs. It also gives you breathing space between your bills, so you’re not living paycheck to paycheck.
Typically, experts suggest putting away 3–6 months of living expenses to alleviate financial stress and give you a buffer in case of unexpected illness or job loss. Just think of it as your personal parachute, that you can open in case of emergency (and if you do, start repairing it straight away)!
What are your priorities next year?
You need to be clear on what your most pressing goal is. It can be helpful to group your financial goals into short (up to a year), medium (1-5 years) and long-term goals (5 yrs upwards).
Kate’s tip: Timeframes are always individual, but I always suggest only investing your money if it’s a long-term goal. It should not be where your holiday money or emergency fund is gathered.
When it comes to setting financial goals, it can be tempting to begin working towards more than one at once. If you have multiple things you need/want to save and invest for or pay off, begin prioritising by establishing which goal is most important and listing them in order.
Action tip: Identify and write out a list of your short, medium and long term financial priorities.
Creating your goals and 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 2022.
What does the end result look like and mean to you?
Write your goals down somewhere that you’ll see on a regular basis (Eg: journals or stuck on bathroom walls).
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 each month. As they repeatedly tell you at school, make sure your goals are SMART goals (specific, measurable, achievable, relevant and time-bound)!
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 include saving up for an overseas holiday, building an emergency fund or paying off your credit card debt.
- A long-term goal could include buying a house down the track or ensuring a comfortable retirement. Remember to 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.
Action tip: Create strategies to keep on top of and check in with your plan on a regular basis, e.g. budgeting apps, Google Sheets, calendar alerts, a monthly review with a trusted friend/family member, etc.
Hopefully some of these tips help you in reflecting on 2021 and establishing clear financial goals for 2022.
Remember, 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 these past two years have taught us anything, it’s that life is precious and things can change in an instant, so make sure to live your life while working towards your goals.