How to create financial goals for the new year

As December comes to a close, you might be considering goals for the coming year. If you’ve got a money goal in mind, we’ve got some tips that will set you up to succeed.

What do you want to achieve, and how would it change your situation? Having a new year's resolution for your finances is commendable, but how likely are you to achieve them or get value from them without practical goals? That’s why you need to define your goals with a framework. With a framework, you’re building a system that enables you to keep track of your progress and systematically achieve success. The SMART framework is a great way to do this:

Specific: Your goals should be specific rather than general or vague. What numbers do you want to hit, and how will they put you in a better financial position?

Measurable: Quantify your goal, and ensure that progress is trackable over time. How will you track your progress?

Achievable: If you set your goal unreasonably high, you're not setting yourself up for success. Try splitting your goals into smaller, more achievable ones.

Realistic: Assess the steps necessary to achieve your goal. They should be reasonable and well-paced to help you tackle your goals one piece at a time.

Time-Based: Establish a firm time frame to hit your goal. This timeframe will help keep you disciplined and on track.

Your resolution may be one of four financial goal types: saving, earning, budgeting, and paying off debt. With these goals set, it's valuable to have some ideas to get started:

Saving: There are many ways to save through the year. You can increase your employer-sponsored retirement plan contributions (if applicable) or set up automatic transfers to a savings account.

Earning: Reassess your work situation. Are you in a place to ask for a raise? You could also consider looking for another job or starting a side hustle.

Budgeting: Try writing down your fixed and variable expenses and see what's left each month. Use this information to build a monthly spending budget and measure your performance over the year. If you're interested in learning more about budgeting and saving, visit our articles on those topics.

Paying off debt: Consolidate your debts by taking out a personal loan or creating a plan to pay off your debts every month incrementally. The Snowball and Avalanche methods are popular strategies to get out of debt.

Changing your habits can drastically change the amount of money in your savings account by the end of the year. Successful financial resolutions often require creating and maintaining new habits with your money.

The first thing you should do is audit your current financial habits. Take a look at your income and expenses, and design a budget from what you learn. For example, you might find that you spend a lot of money by eating out for dinner, and your solution could be to limit the amount of times you go out each month.

Then you should work to build habits that make you aware of your financial activities, such as conducting a regular reassessment of your budget to make needed shifts in your behavior. They say that it takes 21 days to build a habit, but the truth is that it probably takes a little longer. The willpower you put in now to establish a habit might take some patience, but you will be paid back by meeting your goals with what becomes routine behavior.

You have until the middle of April to submit your federal tax return, but did you know you can submit it as early as January? And what are the benefits of early submission? An earlier submission means an earlier tax refund (if you have one coming). It also gives you more time to deal with mistakes or misfiling that could cause a delay. It might help you avoid identity theft and plan for your upcoming tax burdens. Now you can create a plan for your taxes that will benefit you most. Take some time to explore ways to lower your overall taxable income with things like employee-sponsored retirement donations, or Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs). If you're expecting a refund, this is a great opportunity to create a healthy financial habit. Try directly depositing your refund into a savings account. If you don't have an emergency fund, this could be the perfect opportunity to start one.