I’ve been thinking a lot about financial goal setting lately. It’s a new year and while some of us may have set other awesome goals such as working out every day or eating healthy, smart financial goals are just as important.
Setting financial goals means that you’re not only creating a stable financial future for yourself but, at the risk of sounding cheesy, working toward accomplishing your dreams.
That’s why I wanted to cover key steps for smart financial goal setting for millenials in 2020.
1. Consider what’s important to you
What you value should guide your goals for the year. For example, travel and a healthy lifestyle are two things that I highly value. Maybe you value work-life balance, family, or starting your own business one day. If you’re not sure about your life’s priorities, check out the following list for some ideas:
Write down your top five values and add more details. For example, if “Creativity” is a top value, you might say, “My dream is to open my own art studio.” We’ll revisit these values in Step 3. This step is key for smart financial goal setting for millennials.
2.Review your current financial situation
Now that you have a general idea of what you value, you now need to find out if your current financial situation is on track with your priorities in life. Your current situation will also help you decide which goals to focus on first.
Answer these questions:
- How much income am I bringing in?
- How much am I spending per month?
- What items am I spending the most on?
- What is my net worth? (you can calculate that here).
Maybe you find that you’re spending a lot of money on high-priced coffee each month and putting very little of your paycheck into a savings account. But if one of your top values is financial freedom, you’re not spending on what you value.
If you’re not there yet, you can still set goals to make sure that you’re working toward your life priorities.
3. Set S.M.A.R.T. goals
If you haven’t heard of the S.M.A.R.T. acronym before, it’s a great way to set goals that you can actually reach. It stands for “Specific,” “Measurable,” “Achievable,” “Realistic,” and “Time-Bound.”
Here’s how to set S.M.A.R.T. goals: Let’s say that a top value for you is “Adventure.” But right now, according to your review of your current
financial situation, you don’t have any travel savings. A S.M.A.R.T. goal could then be, “Save $2,000 for a trip to Columbia by the end of 2020.” You now know how much you need to save, why, and when you’ll accomplish your goal.
Your goals also don’t have to be long-term. You can create goals for any time period this year:
- Short-term goal: Create a budget by February 2020.
- Mid-term goal: Pay off $500 in credit card debt by July 2020.
- Long-term goal: Save $10K to buy a car by December 2020.
I do recommend starting with goals that will help you thrive financially. If you don’t have a budget yet or an emergency fund or if you’re in a lot of debt, start with those goals first and then move onto things like vacation goals.
4. Check your progress
Write down all of your smart financial goals either in a notepad, app, or spreadsheet. This makes it easier to track your progress throughout the year.
I find it also helps to place your goals where you can see them such as on a piece of paper in your room. As you accomplish different goals, check them off the list. To help with motivation, plan small rewards for accomplishing each goal such as a spa day or weekend beach trip.