How To Set Financial Goals For Success In 2023

With a new year just around the corner, most people habitually start thinking about goals. We all do it, don't we? While our goals don't have to start on January 1, it's a natural time to evaluate and start anew.

Even if you haven't been consciously thinking about your own goals, chances are, they've been creeping up in your mind. It's time to dive in and get those goals out in the open and make things happen.

Goal setting, especially setting financial goals, can be intimidating, frustrating, and time-consuming, and oftentimes, we just put it off because we get overwhelmed.

Why do we get so emotional about it? Because we don't have a plan - a step-by-step guide to help us navigate through the process. Setting financial goals is easier when it's broken down into manageable "bite-size" pieces.

Getting Started - Set Financial Goals
Start by creating a brain dump list. Write everything down, whether large or small. For this particular exercise, focus on your money goals. (But this process will work for all your other goals as well.) Include your long-term financial goals, mid-term financial goals, and short-term financial goals.

Here are some clarification on the timelines:

  • Long-term goals are considered to be goals that take longer than five years to achieve.
  • Mid-term goals generally take between one and five years.
  • Short-term goals are normally achieved in six months to a year.

It might take you a few days to get your list together, and that's okay. Be thoughtful and thorough. Do you need to pay down credit card debt? Build an emergency fund? Save for a down payment? Start saving for your child's college education? Plan your retirement savings? Want to be debt free?

Four areas to contemplate as you write down each personal finance goal:

  1. Your consumption and the cost of inflation. These both are big contributing factors to your financial situation. Inflation has risen considerably and will affect your financial planning. Life changes might mean higher usage of some things, so adjust your expenses accordingly. 
  2. Allow an ample allowance for the things and activities that hold extra meaning to you in your life - for example, travel, cars or hobbies. If you enjoy traveling, consider everything associated with it - the price of flights, gas, meals, etc. Eventually, you might want some new lenses for your camera or a new program to compose your music. Give extra thought to every aspect of those special things.
  3. Consider your end game when you retire and at the end of your life. No matter what your future needs are, you'll want to ensure that you have enough money. Do you want your finacial situation to be:
    • The same as it is right now
    • Better than it is now
    • Nothing. I want my last check to bounce
  4. Which goal on your list is the top priority? What are you passionate about? What goal would be the most life-changing? Discover your purpose. 
    • "I think I'm here to _____ "
    • For example: "I think I'm here to help others." Now expand on that. Dig deep for the who, the why, and the how. What brings you the most joy? Find that life-changing goal and how it will define you.

What kind of goals should you have? Of course, everyone has different priorities, but some of the most common financial goals include the following:

Having an emergency fund. There are many uncertainties, and having a financial backup is essential. It can also lower stress. Knowing that you have the funds to cover three to six months of your monthly bills can put your mind at ease.

Making a budget. Having a budget is an important part of achieving your financial goals. Knowing and logging your spending habits can help you find your money strengths and weaknesses.

Getting rid of credit card debt. Credit card debt is a strain on you and your money. High-interest rates take your money out of your pocket. This particular goal is a top priority for many people.

Prioritize Your Goals
With your financial goal list in hand, it's time to sort them by importance. (The time frame needed to accomplish the goals doesn't matter here.) Some will be very specific, and some will be more generalized. One goal might be to save money for a vacation home (specific), while another might be to reign in your spending habits (generalized).

Consider these as you prioritize each financial goal:

  1. How are you doing mentally? Are you still working? Do you still have the complete mental capacity to work on some specific goals you've listed?
  2. How is your physical health? Will you need to modify any of your goals due to physical restraints?
  3. Do you enjoy life? This might seem like an odd consideration, but it's an important one. You need to LOVE your life! Some of the goals on your list might need an adjustment to ensure that you enjoy life. Are there things present on your list because you "hate" something? For instance, "I hate my job." Those need to be a priority. Clinging to hate and misery does not help your mental or physical health.
  4. What is your stress level? The idea is to create a life that doesn't cause you a ton of stress. Do you overcommit yourself to work, home, church, and friends? If you have an overabundance of stress, it's time to readjust your priorities.
  5. How long have you had these goals? Have you been thinking about emergency funds over the last few months, or have you wanted a retirement plan for years? Are there specific goals you longed to do but keep putting off? (Hiring a certified financial planner to teach you about financial literacy and help you with your investment strategy or finding a lower interest rate for your mortgage.)

How To Achieve Your Financial Goals
Now that your list is made and prioritized, it's time to start making progress toward your money goals.

As you look at your top priorities, pick just one goal. It may be tempting to work on several at once. Don't! Working on too many goals at once can be overwhelming and stressful. (We're trying to avoid that, remember?) Just choose one.

Remember that as you set financial goals, it's important to create a realistic budget and stay with it. For example, if you decide that paying off your credit card debt is important so that you can afford to put more money towards your IRA contributions, then you need to stick to your budget so that you will be able to meet your future retirement needs.

Change your perspective. Imagine that you've just achieved one of your financial goals. How do you feel about it? How are you different now? How has your life changed because of it? Embody and become your goal. Live it. Breathe it. Be the goal.

Continue with dedication to your goal until you have completed it. Allow yourself to feel proud of your success. Savor that sense of accomplishment and document it to reflect on in the future.

Now that you've embraced and achieved that goal look back at your brain dump list and see what stands out. You may notice that your perspective has changed since you've become your goal. Some items on your list that you originally ranked very low on your list may seem more important to you now.

Other things that you placed as high priorities may no longer be at the top of your list, or might not be of importance at all. Place these items at the bottom of your list to review after more progress is made. You might eventually decide to remove them completely from your list.

Reevaluate your list, reprioritize, and start the process again. As you continue setting, achieving, and becoming your goals, you'll see your relationship with your money and yourself shift positively.

Ready To Get Started?
Now that you have chosen your first goal create your plan and dive in. Embody the goal and move forward.

Focus on your goal every day. Your dedication will be rewarded with a financial win. If you want guidance through any part of this process, simply schedule a free call with me.