Creating Financial Goals for the New Year

The start of the new year is always inspiring to set and work toward resolutions. But Vanderbilt knows it can be tough to keep those resolutions as the year goes on. That’s why we’re here to help share some tips and attainable goals to benefit your wallet. Learn more about how to get financially fit and gain confidence in your spending.

How to Make a Financial Goal

You may already have a certain financial goal in mind for this year. Maybe you’re saving up for a vacation or a house down payment. You might want to pay off a credit card balance after the holidays or build your credit score. Whatever your resolution is, take these two steps first before you tackle it.

Review Your Budget and Finances

Before you can make a goal and a plan to achieve it, you need to know where you are financially. It’s a good idea to do this monthly or quarterly.

• It’s always smart to know your gross monthly income (GMI). This is what you earn before taxes, benefits and other payroll deductions are withheld from your wages. This gives you a big picture of your finances.
• From your monthly net income (this is your take-home pay after deductions), subtract your debts, payments due and your regular expenses. This should include what you spend on groceries, insurance, medicines, gas, charitable contributions and other categories.
• Assess how much is left over. This amount is how much you have that could go toward paying down a debt, savings or retirement. If you know this amount, you’ll be able to plan for your financial goal.

Don’t have a set budget? No problem! You can check out our resource to find the right budget method for you. If you already have a budget method but it isn’t working for you, learning about other options may help you stick with it.

Also remember to check your credit report. Annual Credit Report allows one free report each year, so take the time to review it and check for any errors that may need to be reported. You can learn more about how to build up your credit history with this article.

Taking the time to review your financial wellness will help you to make a clear goal with achievable expectations.

Don’t Forget the Details

When setting a goal, follow the SMART method. This means you want your goal to be Specific, Measurable, Achievable, Relevant and Time-Bound.

For example, your initial idea of could be: I want to lower my debt.

It’s a start, but pretty vague, and you haven’t laid out how you will achieve it. Go back to your review of your finances and see what debt you are likely to be able to pay down first. Let’s say it’s your auto loan, and you only have three years of payments left. Now think about how much you could possibly pay with the money left after your expenses.

Now consider a more specific goal: I want to pay off my car loan.

This is better, but you still need a plan of action and a deadline. You could consider paying more than the minimum or round up to the nearest hundredth each month. If you know you will get extra income at certain times, like a tax refund or a bonus from work, you can commit to using that extra money to make a larger payment on the loan.

Let’s say after reviewing your income, you find you can spare $100 a month toward your goal. So, clarify your goal even more.

SMART goal: I will pay $100 extra dollars on my car loan each month over the next three years until it is paid off.

Now you’re ready to set your personal financial goal for the new year. But remember, not all goals have to be long term. Short-term goals can make a big impact as well on your bank account.

Below, we’re sharing four short-term money-focused goals you can tackle.

Financial Goals for the New Year

1. Declutter Your Spending

It’s not only closets that need a clean out from time to time; your wallet does too. The new year is a great time to pinpoint where your money may be spent better. Take some time to find your spending clutter and clear it out.

If you live with a partner or share an account together, make sure to discuss finances together.

Here are a couple of questions that can help:

• Are you using all your streaming services and subscriptions? Is there a gym or carwash membership you barely use? Look at the recurring subscriptions and memberships you are currently paying for and decide which ones can be canceled.
• Have you reviewed your insurance policies in the last year? You may qualify for discounts you aren’t currently taking advantage of, and you may be able to save with bundling or discontinuing coverages you no longer need.
• Do you know your “money personality?” We all have our own spending habits that can help or hinder us. When looking over your bank statements and expenses, be honest with yourself and figure out what money personality you tend to have.

One example is a person buying things based on emotions. If this fits your money personality, try to implement tactics that will curb your impulse spending, like enforcing a waiting period before you buy an item. Also, find a healthy alternative to replace shopping. Talking with family and friends, practicing self-care or doing something you enjoy like gardening or playing with your pet are some ways to lift your mood.

Another helpful tip to declutter is taking instant pay methods off your online accounts and phone apps for purchases, except for automated bill paying. Having to take time to enter in your card information may be the breather you need to decide if buying right at that moment is really necessary.

2. Track Your Financial Fitness

Once you’ve made a budget, you can commit to keeping track of your finances. That way, you know if you are sticking to it or going over. First, decide which works best for you: noting purchases and payments as they happen or adding them up at the end of the day. Then, choose how you want to keep tabs.

Most people track spending one of three ways: manually, with a spreadsheet or through a budgeting app. For manual tracking, carry a notebook and pen or use a notes app on your phone to document your purchases. You can notate them in the moment, but you can also save the receipts or look at your online bank statements to write down later.

Excel and Google sheets are two digital ways to keep your spending organized and are ideal for filling out at the end of the day.

A budgeting app works for both. There are many to choose from and they are conveniently at the ready on your smartphone.

To make tracking easier and less stressful, automate payments where you can. Just make sure to designate a regular time to review your progress.

3. Take Small Steps to Save

We get that it can sometimes it can be hard to save, but don’t think you only have to put large amounts in your savings or emergency fund. Saving a little on a consistent basis can really add up!

According to the investment experts, The Motley Fool, “The average American household brings home about $1,000 per week, meaning setting aside $10 is basically 1% of household income.” If you save $10 a week for a year, you will end up with $520 dollars at the end of 52 weeks. That’s an achievable goal that will leave you with a great start to your nest egg.

Another option you could try is the 52-week money challenge. You save a dollar amount for the number of the week in a year. Start with $1 in week one and increase the amount by $1 each week ($2 for week two, $3 for week three, $4 for week four, etc.) until you are up to $52 at week 52. By the end up of the year, your savings will be $1,378.

If you have a goal like saving up for a mortgage down payment, these small and simple steps can help you achieve it. Start where you can, whether it’s $10 or $20 a week out of your budget, for a whole year. To make it even easier, you could have your paycheck automatically set up to deposit that set amount into your savings account, so you won’t be tempted to spend it.

4. Shop Smarter

Want to find ways to be under budget or find extra cash to add to that savings amount per week? Make shopping smarter part of your resolution. Here are some guidelines that can help you save:

• Buy generic over name brand. Generally, value brands are going to be cheaper, whether it’s food or prescriptions.
• Stick to your grocery list and plan it based on what’s on sale.
• Take advantage of coupons for items you need and only buy in bulk if it really is cheaper and you will use all of it.
• If you are looking for bigger ticket items, research the best one for you first and then watch out for annual, online and holiday sales. Always do price checks at multiple stores.
• Need an outfit for a one-time event or want to add some options to your outfit rotation? Shop at thrift and used clothing items stores.
• Love reading? Sign up for a library card to check books out instead of buying that new paperback. Most libraries also offer ebooks and audiobooks, too.
• Pack your lunch for work instead of going out and eat at home when possible. Even if it’s only for half the week, that could give you an extra $20 for your savings plan.

Hopefully these tips will inspire you for your own financial resolutions this year. And remember, if a budget or saving style isn’t working, go back to reviewing your finances and the SMART method. Make sure your goal was achievable and adjust where you need to. And for more tips or finance questions, be sure to check out our blog.