How to set financial goals that you can actually keep

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A new year is synonymous with new beginnings, including financial ones. So if you’re planning on setting some new financial goals that you’d like to achieve in 2022, we’ve got some tips you can follow to make sure you’re set for success.

Select spoke with Brittney Castro, a Certified Financial Planner at Mint, to share some of her top tips for creating financial goals you can actually achieve in the New Year. Here’s what you need to keep in mind.

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1. Avoid creating goals that are too extreme

It can be easy to feel like you need to hit all of your financial goals at the same time – maximize your pension contributions, pay off thousands of dollars in debt, and limit your discretionary spending so you can save more. But setting goals that are probably beyond your current reach can actually make you uncomfortable if you don’t meet those goals.

“One of the difficulties with goal setting is thinking ‘all or nothing,’ Castro says.“ It’s an extreme state of mind, and when we do things like that, we prepare for it. ‘failure because we don’t take into consideration all the grays in life. “

If your goal is to save $ 500 per month, but you haven’t even started saving $ 50 per month, it will be very difficult to take the necessary steps to review your budget and make sure you actually have 500. additional $ to be saved each month, says Castro.

Setting more achievable goals for your personal situation – even if they seem small, like saving $ 50 a month – allows you to develop healthy financial habits that will be sustainable in the long run. This way, you can feel motivated when you reach your current goals and progress to bigger ones.

2. Focus on creating progressive shifts

One way to avoid creating goals that are too extreme is to focus on the ones that keep you growing over time.

“You can say, ‘I’m going to increase my savings by 1%, and every few months I’m going review my budget and increase my savings by another 1%, ”says Castro. “It’s more sustainable than going from saving nothing to saving a lot more.

It’s also important to keep in mind that things can change. You can spend more money some months because you have some big occasions like birthdays, weddings, and vacations. Other months your expenses may be a little lower. For this reason, it is very important to give yourself a little grace and start by creating healthy little shifts with your money. And, as your income and budget grows over time, you may have more room to take even bigger steps towards your ultimate goals.

3. Accept the fact that there will always be financial surprises that arise.

Make progress on any financial goal, like Paying off credit card debt can be fun until you have to reuse your credit card in an emergency and the repayment cycle starts all over again. There is a lot of emotion when it comes to managing your money, even after reaching a great goal, as you may feel new pressure to hold on to it. It can be difficult to do when you feel like there are always new expenses looming over you.

“With money, there’s always that unexpected event that happens,” says Castro. “It’s a no-brainer, so the sooner we accept it the easier it becomes. Maybe your car breaks down or you get an unexpected bill. You need to build that into your financial strategy so you don’t get caught. off guard, and it won’t. doesn’t derail your progress. “

One way to prepare for unexpected expenses is to create an emergency fund. An emergency fund is money separate from your savings account that you can use to cover any unforeseen expenses. That way, you can pay that surprise bill or cover your emergency auto repair without going into too much debt.

Financial experts generally recommend putting emergency money in a high yield savings account, which allows you to earn higher interest each month compared to traditional banks. This way your money can grow a little faster even if you don’t make regular contributions. There are many options, but Select has rated the Marcus by Goldman Sachs High Yield Online Savings Account as the best overall account and the Ally Online Savings Account as the best option if you also prefer to have a checking account. .

Read Select’s roundup of the best high yield savings accounts.

4. Use your budget to determine what is most feasible for you.

The final tip, and perhaps the most important for setting achievable financial goals, is to be aware of your current spending and spending habits. This allows you to create realistic goals given your situation.

Tracking your spending and spending can seem daunting, especially if you’ve never done it before. In fact, if you’ve never written a monthly spending plan before, this could be a financial goal you decide to work on in 2022.

There are many ways to go about this, including digging through your bank statements and noting how much you spend each month. Or you can use a budgeting app like Mint or Personal Capital, which connects to your bank accounts, investment accounts, and any other financial accounts you own. A budgeting app automatically keeps track of your transactions and categorizes them for you so you can get an overview of the types of things you spend the most money on.

From there, you can make intentional decisions about where you would like to spend less (or even spend more) and how you would like to redirect your money towards your new goals.

At the end of the line

It may seem like there is a lot of pressure to set new financial goals, achieve them and maintain them. Start by reviewing your budget so that you can set achievable goals based on your situation. This way, you can make small changes that are both incremental and impactful while preparing for any financial surprises that might arise. It’s not always easy and can even be emotional at times, but the payoff can be worth it.

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Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.


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