Setting financial goals for the new year is an important step in achieving financial success. The beginning of a new year is the perfect time to reflect on your financial situation and make a plan for the future. By setting specific, measurable and achievable goals, you can take control of your finances and improve your financial well-being.
4 Examples of Good Financial Goals
For a financial goal to be considered good, it should be SMART: specific, measurable, achievable, realistic and timely. Additionally, it is important to make sure your financial goals are realistic for your current financial situation. Here are some great examples of financial goals you can aim for in 2023.
Creating and following a budget can be a great way to take control of your finances. A budget allows you to track your income and expenses and see where your money is going.
It also helps you identify areas where you can decrease your spending and redirect that money toward other goals.
Paying Off Debt
If you want to pay off debt, set a specific goal to pay off a predetermined amount by a certain date. The avalanche method is a good place to start — you begin by paying off debts with the highest interest rates as quickly as you can.
When setting financial goals, it is important that they are realistic and achievable. For example, if you set a goal to pay off $50,000 of debt in one year, but you only make an annual salary of $35,000, that goal is probably not realistic. Instead, set a goal to apply a percentage of your monthly income to debt repayment.
Creating an Emergency Fund
An emergency fund is a savings account set aside specifically for unexpected expenses or financial emergencies. It is important to have an emergency fund because it can provide a safety net to help you pay for unexpected expenses without having to go into debt or rely on credit cards.
Having an emergency fund can also give you peace of mind, knowing that you have a cushion to fall back on if something happens unexpectedly such as a job loss, a medical emergency or car or home repairs.
Financial experts recommend having an emergency fund that can support at least three to six months’ worth of living expenses. This way, if you have a temporary loss of income, you will have enough money to cover your basic needs until your income is restored. Decide on an amount that is comfortable for you and your family, and set aside a percentage of your income every month until you achieve it.
Investing for the Future
If you are not already saving and investing for retirement, it is not too late — this year can be a great time to start. By beginning investment early, you can drastically increase the amount of money you have at the end of your career.
Even if you have a 401(k) plan through your place of employment, you can still set aside additional money in an IRA account. Setting aside a portion of your income every month is an investment in your future stability.
How To Set Financial Goals
Setting goals can be overwhelming, but it’s not impossible. Here’s a good place to start.
Assess Your Finances
One of your first steps in setting financial goals should be assessing your current financial situation.
Take a look at your income, expenses, debts and savings. Identify areas where you can cut back on spending and areas where you can increase your income. This will give you a clear picture of where you stand financially and where you need to focus your efforts.
Decide What You Want
Next, think about what you want to achieve in the coming year. Do you want to pay off debt, save for a down payment on a house or build an emergency fund? Once you have chosen what you want to achieve, you can start setting specific goals.
FAQSetting goals, financial or otherwise, can be overwhelming, and if you overextend yourself, you might find yourself not meeting your goals at all. Here are the answers to some common questions about financial goals to help you set the right ones for your needs.
- What is the most important financial goal for 2023?
- The most important goal will depend on your personal situation. However, taking a look at your expenses and income and setting a realistic budget is often the first step.
- What is the best method for paying off debt?
- One of the best methods for paying off debt is the snowball method. In this method, you focus on paying off your smallest debt first and then roll your payments into the next smallest debt once that one is paid off.
- You could also try the avalanche method and focus on the debt with the highest interest rate first.
- What is considered a financial goal?
- A financial goal is a goal you set that has to do with your finances – your money. That could be a goal about saving for a specific expense, like a vacation or college, paying off debts or learning to invest in stocks.
- What is a good example of a financial goal?
- Creating an emergency fund is a good financial goal, if you don't have one yet. Or, if you have a lot of debt, a good goal would be to pay off a certain percentage by a specific time, or commit to paying a certain percentage of each paycheck toward your debts.
- Ultimately, the best financial goal for you is one that fits your specific situation. The first step is taking a look at your finances and deciding what you most need to do first.