Setting a financial resolution or goal for the new year can be daunting. Whether you’re trying to pay off accumulated debt, decrease your spending in a certain area, or save for a big purchase or an emergency fund, there are three simple steps to setting a goal that will get you to where you want to be — without feeling overwhelmed or, worse, losing steam altogether.
The most important part of keeping any new year’s resolution is in the way you word it. Setting vague resolutions like “Save up for a new computer” might be a good intent, but it’s too abstract. It’s not measurable, and you may find yourself quickly losing direction or even getting frustrated because you’re just not getting to where you want to be.
Instead, you want to make your goal something that is actionable, achievable, and accountable.
Turn Your Resolution Into a Revolution
Whatever your financial goal might be, you first need to sit down with a pen and piece of paper, and figure out exactly how much money you will need to achieve your objective. If you’ve been trudging under a pile of debt, for example, write down the total amount that you owe in each area — no matter how nerve-wracking it might feel. Break it down by category — each credit card, past due bills, student loans, etc — then add it all up.
If you want to save for a big purchase, do some research and figure out exactly how much it will cost you. Factor in any additional expenses: a desk and chair for your new computer; repairs for a home you’re mortgaging; new tires for a used car you’re purchasing.
Then, break it down. Figure out how much you need to pay or save on a weekly or monthly basis until you reach your goal. So, if you’re chipping away at a credit card bill or saving up to buy a house, determine a weekly amount to put toward it. Money Crashers suggests printing out your bank statements to get a good idea of what is and isn’t financially possible for you.
Your resolution becomes an actionable revolution: “Save $100 every week for my new computer.”
Set the Bar Just High Enough
When setting any resolution, you want to make sure that it isn’t something that’s completely out of reach, but just challenging enough. For example, if you have a lot of debt you’d like to pay off, be honest with yourself. It may not be humanly possible to catch up in just twelve months. However, it might be more realistic to pay off one credit card while making regular payments on your other debt and bills.
By figuring out and then breaking down the total amount of your financial resolution, you can calculate whether it’s within reach. You may not be able to save up $10,000 toward retirement in a year, but your income might provide enough room for you to put away $5,000 instead. Reality check yourself by determining whether your new year’s resolution is in fact a five-year goal instead.
Any goal should be challenging yet still within your reach, that way you feel a sense of accomplishment once you’ve achieved it, rather than like an ant trying to move a mountain.
Keep Yourself on Track
The third key to making a financial resolution for the new year is holding yourself accountable. Many people often start off strong but quickly lose steam. Keep yourself motivated by setting milestones and deadlines.
Setting milestones can be as simple as drawing a bar with markers for each mini goal, sticking it on your fridge, and coloring it in as you reach each point. As long as it enables you to see your progress — whether on your home office wall, in a spreadsheet, or even with each monthly statement — it can be as simple or complex as you’d like.
You can also hold yourself accountable by giving yourself an exact date to meet certain milestones or the total goal altogether, if it’s small. Going back to the computer example, you might write your goal as “Save $100 every week for my new computer, which I will order in October.”
Speaking of writing, people who write down their goals are more successful than those who don’t, according to Forbes. Even if no one else ever sees your goal, writing it down and putting it in a place where you’ll always see it will keep it fresh in your mind. However, sharing your goal on Facebook with your friends and family will really keep you accountable, as you can “check in” with them by posting updates as you reach milestones.
Above all else, be gentle with yourself. You’re only human, and beating or “should”ing on yourself isn’t helpful. Remember that anything worth having takes time — and don’t forget to treat yourself with a small reward now and then.
With the right mindset, a well-stated goal, and a little bit of elbow grease, you’ll achieve your new year’s financial resolution in no time.