One of the problems I have with goal setting is that I often set too many goals. Indeed, I’ll make a whole list of goals I want to accomplish — only to have most of them fall to the wayside. That’s the problem with setting too many goals. Many of us can’t do that many things at once.
Instead of setting a whole bunch of money goals for the coming New Year, consider whittling it down to just one. You are likely to be more effective overall if you concentrate your efforts on one thing at a time.
What is Most Important to You This Year?
Look at your financial situation, and consider your financial priorities. What do you think is the most important financial thing for you to accomplish this year? Do you want to be able to max out your retirement contributions? Look at your monthly expenses, and see what you can cut out. Work, a little each month, to reduce your unimportant expenses and increase your retirement account contributions. Find ways to increase your income in order to meet your goal.
You can set up a similar plan with paying down you debt, or with saving up for a family vacation. Look at your long-term financial goals, and decide what you can realistically do to reach your goals later on. Make this year one that really helps you kick your most important financial goal up a notch.
Planning Your Efforts
Every guru out there points out that you should break down your big goal into smaller steps. As a result, your one important goal for the year quickly becomes several little goals. That’s not a problem, as long as you stay focused on working toward your main, overall result. Breaking down your big goal into a series of mini-goals is more like creating a road map of a trip. You want to follow each step logically, in a sequence that makes sense.
Your first step is to figure out where you’re at right now. If your goal this year is to max out your Roth IRA contribution, you first need to take stock of where you are. You can contribute up to $5,000 a year to a Roth IRA. That breaks down to a little more than $416 a month. If you already contribute $150 a month to your Roth IRA, you need to find $266 more in your budget each month.
Once you know where you are, and see where you need to be, you can start making a plan to get there. Perhaps you know that you won’t actually contribute $5,000 to your Roth IRA this year. Maybe your goal is to work on your finances all year so that, by the end of the year you are contributing $416 each month, setting yourself up to contribute the maximum amount of $5,000 each year (until you are eligible at age 50 to increase your contribution).
As you progress through the year, you can work, a little at a time, to free up the extra $266 in your budget each month by cutting back on some less important expenses, or by earning more money with a side hustle or home business.
Don’t try to solve all of your financial problems in one go, or try to reach financial freedom all at once. You are more likely to become discouraged through such efforts. Instead, focus on one major money goal this year. Once you have reached it, you’ll feel ready to tackle the next goal on your list.
- E*Trade IRA - Official Site