The New Year is a chance to look at your financial situation and your financial goals to determine where you stand and where you want to be at the end of the year. Setting financial goals is crucial, whether you are on track or not, to ensure you end the year where you want to be. Here are some tips to help you set your financial goals for the coming year.
1. Identify Your Problem Areas
Do you lack a long-term investment strategy? Have your emergency funds gotten drained with unexpected expenses in the past year? Is your budgeting in need of a makeover? Before setting financial goals for this year, identify your problem areas, and focus some of your goals on fixing those.
2. Set SMART Goals
SMART is an acronym for Specific, Measurable, Achievable, Relevant and Trackable. When making goals, set specific goals that you can measure, that can be achieved in a specific time period, are relevant to where you want to be at the end of the year and can be tracked. With SMART goals, you will enter the New Year with a plan for your future financial success.
3. Know the Three Types of Goals
Finally, consider the three main types of goals, and set some goals for each. Short-term goals are those items you need to accomplish in the next few months, such as purchasing new furniture or appliances.
Medium-term goals may occur in the next year or two. These may include a new vehicle purchase or a trip you wish to take.
Long-term goals are your investment strategies or major purchases. New real estate investments or your retirement contributions fall into long-term goals.
Your financial advisor can help you establish long, medium and short-term goals, but your financial plan for the year should include all three. Focusing on just one could cause you to miss out on accomplishing something you need or want to accomplish for the year.
No matter where you are in your financial planning process, setting financial goals is going to be an important step towards your future success. With these tips in mind, you can set effective goals that you can track and measure throughout the coming year.
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Your Guide to Financial Independence
Rick Epple, CFP(r)