Debt, Emergency Fund, Goals, Saving
January 06, 2022
I hope the new year is off to a great start for you and your loved ones.
I know that for many of you, a new year brings hopes and intentions of working on new goals, and often those goals are financial in nature.
But what I see happen so often is that people have good intentions but aren’t very clear with themselves about what the actual goal is.
Wanting to decrease debt is a goal. Or increase savings.
Nothing wrong with that. Except they lack specifics, and that’s a big key to not just setting goals but reaching goals.
Here’s a framework that will help you work toward any money goal.
Define What Would Make You Feel More Secure
What is the one financial goal that would bring you peace of mind? Don’t focus on what others say you should do. The best goal to set is the one that will make you feel more in control. The goal that resonates loudest and strongest in your gut is the best because it comes packing a wallop of motivation.
Set a 10% Initial Goal
Often times we set a high bar for a goal and when we fall behind, we just quit. My suggestion is to aim for 10%. If your goal is to reduce your credit card debt, refine that to a goal of reducing your debt by 10%. If you have a $5,000 balance today, that will mean getting it down to $4,500. Your goal is more emergency savings? Okay, if you saved $200 a month for emergency savings last year, can you bump that up to $220 a month?
You get the idea.
I chose 10% because I have yet to run into anyone who with some determination and grit can’t find 10% to cut from spending so they have more to use for an important goal.
What’s Your Time Frame?
Set a shortish check-in date of no more than three months to see how you are doing. Can you get the credit card balance down to your goal in 2 months? Were you able to manage the extra emergency savings for three straight months?
Add a Review Date to Your Calendar
I am serious here. I want you to add a meeting to your calendar based on whatever timeframe you set for your goal. You must check-in with yourself on that date. I am confident that you will find you reached your goal. I hope that fills your tank with more motivation because we’re just getting started.
Reset Your Goal
How about adding a new 10% to your goal? So if the credit card balance is now down to $4,500, your next goal is to get it to $4,050. If you have managed to up your monthly contribution to emergency savings to $220, push it to $224 or so.
Again, set a deadline to see how you did, and then reset your goal for the next few months.
I hope this approach will give you all the momentum you need to reach your financial goal for 2022.
Answer Yes or No to the follow statements.
I pay all my credit card bills in full each month.
I have an eight-month emergency savings fund separate from my checking or other bank accounts.
The car I am driving was paid for with cash, or a loan that was no more than three years, and I sure didn’t lease!
I am contributing at least 10% of my gross salary to a retirement plan at work, or I am saving at least that much in an IRA and/or regular taxable account.
I have a long-term asset allocation plan for my retirement investments, and once a year I check to see if I need to do any rebalancing to stay on target with my allocation goals.
I have term life insurance to provide protection to those who are dependent on my income.
I have a will, a trust, an advance directive (living will), and have appointed someone to be my health care proxy.
I have checked all the beneficiaries of every investment account and insurance policy within the past year.
So how did you do?
If you answered yes to every item, congratulations. If you are working on improving on a few items, I say congratulations as well.
As long as you are comitted to truly creating financial security, I applaud you. If that means you are paying down your credit card balances, or are building up your emergency fun with automated payments, that’s more than fine. You are on your way!
But if you found yourself saying No to any of those questions, and you’re not working on moving to Yes, then I want you to stand in your truth. No matter how good you feel, you have some work to do before you can honestly know what you are on solid financial ground.
Credit & Debt, Saving, Investing, Retirement