By Deborah Meyer
Research shows that New Year resolutions fail. Why? Because resolutions aren't clearly articulated goals. In my opinion, annual goal setting is a necessary yet arduous process. This blog post focuses on the goal setting process, and financial goals in particular. Hopefully, it will inspire you to create your own set of goals for 2017.
1. Start with aspirations and aim high.
Think of the goal setting process as a funnel. You should start with the high level, strategic dream or aspiration and then narrow it down into a particular goal.
DREAM → GOAL → SMALL STEPS
If you want to pay off your mortgage, that is a great aspiration. But it becomes a goal when you define how much debt to pay down in a particular year. Let's suppose your mortgage balance is $150,000. Unless you have a sudden windfall, it is unlikely you will erase that debt within a single year. Rather, create a plan and define the terms. Perhaps you can set the goal to pay down $10,000 of principal by December 31, 2017. Further decide if you want to make the extra principal payments each month, quarter, or semi-annually.
By aim high, I mean go outside of your comfort zone. If $5,000 of debt pay is comfortable, then $10,000 is a stretch but doable (with the proper motivation). Saying you will pay down $30,000 in 2017 is delusional, so don't go to that extreme either. Leave your goal at $10,000.
[Related: 5 Powerful Money Habits to Adopt in 2017]
2. Appreciate the crossover.
Many people assume goals are mutually exclusive. I don't think this is the case at all; instead, there is a lot of interconnectedness. If your family and personal relationships are going well, you are probably tending to your physical, financial and emotional health. If you cannot get motivated to achieve a weight loss goal, you may lack the perseverance to achieve a financial goal too. To be most effective, strive for 7 to 10 goals annually across all realms of life.
3. Articulate and monitor your goals.
Nearly everyone will agree that goals are helpful to reaching personal and professional aspirations, yet few actually write them down. Writing your goals in black and white increases your chances of success. Once you articulate them, don't shove them in a drawer to collect dust. Similar to a financial plan, you need to evaluate progress to tweak it.
Let's say your financial goal is to increase business income by $10,000 by December 31, 2017. You set the goal and put it aside until November. Your year-to-date business income is the same as the prior year. How on earth are you supposed to raise an additional $10,000 of business income in two months? Wouldn't it have been more beneficial to set a goal of $5,000 additional income by June 30 and adjust the December 31st goal if you significantly missed the mark?
4. Create measurable and specific goals.
To evaluate progress, your goal must be specific and measurable. Following the prior example, let's say you started too general -- to increase business income. That's not quantifiable. Do you want to increase business income by 20% or 50%? By what date? If you set the goal for December 31, 2017, consider quarterly "check-ins" to see if you're still on track.
5. Focus on the wins, not the gap.
Transformation doesn't happen overnight. Break the goal into small steps. If you have a total of $15,000 of credit card deb tot eradicate, consider the debt snowball approach. Pay off your smallest debt balance by January 31. Then focus on the next smallest balance by April 30. If you look at the big gap of $15,000, it is easy to get discouraged. Setting up smaller incremental goals will keep you motivated throughout the debt payoff process.
6. View failure as an opportunity.
By stretching outside your comfort zone, there will inevitable come a time when you cannot reach 100% of each goal. Rather than thinking of yourself as a failure, focus on what you DID accomplish and how you can learn from this experience. Supposed you wanted to build an emergency fund of $12,000 by December 31 but you only got to $10,000. Look at that! You got to $10,000! That's awesome in itself! Get creative on how to reach the $12,000 goal. Perhaps you have a year-end bonus and can allocate $2,000 of it to the emergency fund. Or boost your 2018 goal to $14,000.
[Related: 12 Steps to Financial Organization]
I hope these ideas inspire you to put your best financial foot forward in 2017.
This article previously appeared on WorthyNest.
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Deborah Meyer, a fee-only financial planner in greater Saint Louis, is founder of WorthyNest. Her professional mission is to educate and empower families about finance, and her expertise lies in helping family-minded entrepreneurs. Learn more at worthynest.com.
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