I admit it: I get caught up in the whole New Year’s resolution thing.
When January 1st rolls around, I want to use the dawn of a fresh year as a breaking point for old habits, and the start of great and wonderful things to better myself and my life.
For many years, I resolved to do better with my finances. Unfortunately, I often found my resolution broken before the first month — or even the first week — came to a close.
The good news is that during my four and a half year journey to pay off my credit card debt, I learned the secrets to achieving any financial goal. You’d be surprised at how simple these three steps are:
1. Define the Goal
To achieve great things, your goal must be clear. In order to properly define a goal, it has to be:
- Specific: Part of the problem with making a new year’s resolution is that they’re often too generic. For example, what exactly did I mean by, “I want to do better with my finances?” Instead, your goal should be something like, “Create a budget, tracking my income and expenses, on the first of every month.”
- Realistic: I also had to come to terms with my own limitations. Coming from a place where we’d never even created single budget, it would be unrealistic to hope to fund a $15,000 emergency fund by the end of the year. I knew that the first thing I needed to do was live within my means, THEN I could adjust my goals to be more sophisticated.
- Trackable: If I say I’m going to create my budget on the first of the month, and I haven’t done it by the 5th, I know I’m not on track. Time to sit down and make it happen.
2. Plan for Success
I’m currently working on a goal to fund my emergency fund with $1,000 by the end of February. When I first started working towards this goal, I determined I would have to put $100 per paycheck into my emergency fund.
Remember: a goal without a clear path to achieving it doesn’t have a good chance of succeeding.
If you’ve done the first two steps properly, what needs to be done here should be very clear. It could be sitting down on the 1st of the month and making a budget, transferring $100 to a separate account on pay day, or whatever action is necessary to keep moving towards your goal.
While your path should be clearly defined by now, this is the part that requires dedication and willpower. The good news is: if your goal is specific, realistic, and trackable, you’ll be motivated by seeing steady progress towards it.
Achieving financial goals isn’t easy, but these three steps provide a framework to give you the best chance of success.
Are you currently working towards any financial goals? Do you have anything to add that could benefit your fellow readers?