As 2023 draws to a close, it is time to prepare for 2024. Part of that preparation means assessing your financial progress and setting new goals. Whether setting goals to be completed by the end of the next year or setting up more long-term goals, it is crucial to start planning as soon as possible.
Setting your financial goals could mean a variety of things. It could be cutting spending, saving for a home, creating an emergency fund, or investing. It could also mean more fun savings, such as for a vacation or creating a fund for gifts to get people for the holidays. No matter the intended outcome, there are specific steps to take to achieve both long-term and short-term goals. This includes assessing progress, creating a plan, working on short-term and long-term goals, and working on the more exciting goals.
Assessing Your Financial Progress
The first step to achieving your financial goals is to access what you already have. If you have had previous goals, look at the ones you have made progress on but still need to complete. You can also look at former goals you had but still need to start working towards. Assessing your financial progress also means reviewing your income and regular expenses, as well as debt you may still have to pay off. Check out some tips on reviewing and and refreshing your financial goals and strategies here!
Sometimes, it is best to put them all down on paper to help visualize those goals. One suggestion by U.S. Bank is to start by listing your financial goals and rearrange them in order of what’s most important to you. By doing so, you can create a timeline with more details of what needs to be done. This will help you map out an ideal plan for achieving those goals.
Creating a Plan
The next step is to create a plan. After you have arranged your goals in order of priority, you can begin filling in what those short- and long-term goals may be. A brief example of this would be setting up a plan to achieve a long-term goal, such as retirement, while also focusing on working towards a short-term goal, such as taking a vacation or becoming a new homeowner.
Although you have to set up priorities, you can still plan to save for more than one goal at a time. The idea is to document your spending regularly. There is no one set way of doing this. It could be a chart or a more straightforward list, but the more detailed and realistic, the better. Some steps for creating a good financial plan are:
- Listing your goals
- Rearranging goals by highest priority
- Determine the cost
- Create a budget based on your income
- Create a timeline of expected progress
- Revisit and cross off goals as you go
Once this plan is all complete and ready to be worked on, it’s time to get started.
Beginning to Work on Short-Term Goals
Short-term goals are the gateway to creating and achieving larger long-term goals. You want to start these goals immediately and gain some of the quickest results. Some can be started and completed within the same year. According to Investopedia, this may include creating a budget, building an emergency fund, and paying off debt.
Creating a budget can be done in a couple of different ways. There is a more traditional way of sorting through and organizing old bank statements and bills, but there is also a lot of newer technology available that will help you track and create a budget for free. This will help you determine what is essential and what isn’t and when or if there is room to make those unnecessary purchases.
Nerdwallet suggests taking a “50/30/20” approach to budgeting. That is 50% of your income for essentials, 30% towards whatever you want, and the final 30% towards debt repayment. Creating an emergency fund is an important part of financial plans that can often be overlooked. Many people have unplanned financial burdens appear in their lives, and setting some extra money aside can help alleviate that blow. This could be hundreds of dollars or thousands of dollars, and there are a couple of different ways to save.
The most common would be to set some money aside each paycheck and put it aside or into a savings account. Another way, as suggested by the Investopedia article, would be to turn a hobby into a way to make up for this money or take this as an opportunity to clean out your home and sell your old items.
Lastly, paying off debt helps free up the amount of money you have to spend each month and incorporate it into your budget. You will have to set a plan for the order you plan on paying off credit card debt, whether it be from the highest to lowest rate or vice versa. If the credit card debt you have accumulated exceeds $10,000 or more in unsecured debt, you may be able to make a negotiation or find a settlement. Keep in mind if you do choose to make a negotiation or use a settlement, this may negatively impact your credit score. Paying on debt may also include paying off student loans.
Saving for the Future with Long-Term Goals
Short-term goals help make extra room to pursue long-term goals. Now that you have a budgeting plan and may soon have more money freed up each month, you can work on a secondary plan to achieve your goals for the years to come. This could be retirement plans, plans to buy a home, paying for a child’s college, or having an overall increased savings each month. Just like the short-term goals, these goals should also be organized by priority.
One Nerdwallet article says most experts say you should be saving about 15% of your income each year to put towards a retirement fund. It is also advised to take advantage of any 401(k) offers or matches your work may provide. Long-term goals aren’t always meant to be completed alone. If you have a partner, you may be dealing with dual income or joint accounts. Whether working to secure your own financial future or you and a partner, it’s best to take any additional services that help you save for the future.
The article also says one easy way to set realistic long-term goals, as suggested by Quentara Costa, is to check if it is “SMART” – Specific, Measurable, Achievable, Realistic, and Time-bound. While you should try to set realistic goals and stick to them, you may also make adjustments over time if you become off track.
If you have written down your goals ahead of time, make sure to mark them off as you or make adjustments to them as needed. Make sure to try to check off the goals of the highest priority first. Remember, once you have completed more of the essential goals, the next goals to tackle are the more fun goals.
Working Towards the More Exciting Goals
Once you have completed all of the essential short and long-term goals on your priority list, it is time to set up new and more exciting goals. Most of these will likely apply to short-term goals but won’t be the highest on the priority list. These include goals such as saving for a vacation at the end of the year, setting money aside for Christmas presents, saving to make home improvements, or saving up to try to turn a hobby into a side hustle.
All of these financial goals are important too, but when mapping out a timeline and budget, they should only be used to fill in the open areas or be added to the agenda after another goal is completed. This is another way of rewarding yourself for achieving some of the stressful financial goals, such as paying off debt.
Financial planning is essential, and it doesn’t have to be a headache. It is important to set goals for yourself, both short- and long-term, but it doesn’t all have to be business. An excellent way to reward yourself is by adding some goals to your list to complete later with a more fun outcome in mind.
When creating goals, it is vital to keep track of your financial progress. This means writing your goals down somewhere, creating a budget and timeline, and crossing them off as you go. You should always prioritize staying caught up on these goals, but if you find yourself in a situation where you don’t believe you will be able to complete one on time, it is fine to make adjustments to the plan.
One of the first things that should be on the list of short-term priorities is paying off debt. Paying off debt, such as credit card debt or loans, is a great way of freeing up some extra cash each month to put towards other future goals. If you need additional help, there are professionals who specialize in financial planning that are available to help you now.