Setting Financial Goals for 2021 and Actually Achieving Them
What, do you think because the first day in January is over, it’s too late to work on your financial goals?
I love the entire first month of the year because it feels like a fresh start. This is the perfect time to visualize an amazing year ahead of you. This is also when you can start laying the foundation for great habits. And now that those holiday-infused and not very thought-out New Year’s resolutions wore off, it’s time to set some REAL goals!
But before you start imagining the amazing changes that are going to have your financial game on fire in 2021, you might benefit from a peek into your financial past…
Before you set financial goals, reflect on your past year
2020 will go down in history as a year that turned people’s worlds upside-down. Many saw a huge change in their income or career last year. Millions suffered job loss and financial hardship. This was a big year for financial changes. And sometimes, that can be a scary thing.
I’ll be honest, 2020 was far from my greatest, financially. I went from a stable paycheck, to fully self-employed and freelancing. And for a while, I was afraid to actually look at the numbers. And I LOVE personal finance. But the fears of not making enough, seeing a bigger than the comfortable balance on credit cards, and seeing my savings shrink… had me avoiding my money.
Do you know what happens when you avoid your money?
It avoids you.
So if you’re in the group of people that would still rather not look at their finances from 2020… it’s time to look. Pour a glass of something delicious, put on nice music, and get your notebook out.
Who knows, you might even be pleasantly surprised!
Know your numbers
Sitting down to this task just may be the hardest part. But once you get started, you might really enjoy this investigative process! Knowing your numbers is the first step in setting solid financial goals for 2021. This is your starting point. This is when you take control of those numbers and make them work for you.
Establish your income and expenses
What numbers should you be focusing on? How much you brought in, and how much you spent. Otherwise known as your income and your expenses. Look at how much you saved (even if that was $0) and how much debt you paid off. If you’re investing, look at how much you invested over the year. Consider comparing your January 2020 statements against your December ones, and make a note of the difference!
Next, add up all of your positive assets. Include any checking and savings accounts, retirement accounts, investment accounts, CDs, and other financial assets. Make a note of this figure! Then, add in any other assets, like equity in a home or personal property that carries value. Add them all together, and these are your assets.
Calculate your net-worth
In order to calculate your net worth, you will subtract any debts from your assets. Go through all of your debts, how much you owe and where, and the interest rate you’re paying. Items in this category include credit card debt, student loan debt, mortgages, the amount owed on your vehicle, and any other money you owe to someone.
Remember, this is not a “beat yourself up about your financial choices” session. If you find yourself getting stressed, sad, or anxious as you analyze your finances, pause. Bringing negativity and focusing on what’s bad will not bring you any closer to those new goals you’re setting! Remember to look at the areas that you did well in, and also spend some time focusing on the good things you’re doing with your money.
Decide which areas you want to improve most
Taking the time to go through your expenses, savings, and overall budget might be an eye-opening thing. This is another reason reflection before goal setting is so important! After going through your numbers you should be able to see what areas you are doing well in, and which ones you want to focus on.
When you have a birds-eye view of what’s going on with your money, you’ll be able to see clearly what you should address. Spending too much on Amazon? Haven’t started saving for retirement yet? Didn’t get your free employer match on your 401k? Are your student loans growing instead of shrinking? Do you need more sources of passive income? Any areas that make your stomach churn a little should be areas you are focusing goals on.
Remember to look at the areas you are doing well in! Were you able to put more than you ever have away for retirement? Did you reach your emergency fund goal? Did you avoid unnecessary consumer debt? Awesome! Definitely focus some of your goal-setting in areas that light you up, and that you can continue to grow in!
Set specific financial goals in your target areas
Now that you know where your strengths and weaknesses are, it’s time to set some financial goals! There are many areas to potentially work on, but be cautious of setting too many goals. It’s better to focus on a few goals and succeed than to try and take on too many and burn out. Try to focus on three areas or less for your new financial goals for 2021.
When you are setting goals, the more specific you are, the better. Get clear down to the exact dollar! Also, get specific on the time frame of your goal. Is the deadline on December 31st? Or is it something you want to achieve sooner? Will you set a goal for each quarter?
Sometimes some more number crunching is necessary to get your goal clearer! Don’t be afraid to go back to your financial reflections for 2020 if it helps make your goals more specific.
When you have your specific financial goals established, don’t forget to write them down! Goals that live only in your head are merely dreams!
Use technology to help you out
Setting your financial goals and tracking them on paper is one thing. Using available technology to track your finances might just take you to the next level. There are some of us that will always appreciate the crisp, pen on paper feeling, but I’m sure you can also learn to love the feeling of having your net-worth automatically updated for you.
There are plenty of free money-tracking apps out there that can give you a snapshot of your total financial picture. This is extremely helpful for seeing how close (or far) you are to achieving your financial goals on a regular basis!
Tracking your spending and savings with an app can also help you focus on any problem areas. If one of your financial goals was to decrease spending, you’ll be able to track what you have spent, and where you spent it, easily.
Imagine the feeling of achieving your financial goals
Mastering your mindset is a necessity for building wealth. Your imagination is a great tool at your disposal! Imagining, and actually feeling, your goals coming to fruition is one of the most important things, and is often missed with goal setting. When you have your specific goal in mind, take a few minutes to imagine them actually being achieved.
Imagine yourself in the future, with your goals completed. How does it feel? Imagine in as much detail as you can! If your goal was for substantially more income, now is the time to envision the joy and relief your income will bring! Feel the feeling of your goals being accomplished as if they are actually happening.
Visualizing the results you want, as if it has already happened, is a powerful tool for achieving goals. This is a method that is used by Olympic athletes and one that many millionaires and billionaires claim has helped them reach their success.
If you want to take this a step further, journal your reflections!
Share your goals
What’s the next best thing you can do to help make your financial goals for 2021 a success? Share them with someone. Whether this is a spouse, significant other, child, friend, coach, or accountability partner you met online, sharing your goals out loud will help solidify them.
Having other people know what you are working towards will help keep you motivated as you work on your goals. It’s easy to “forget” about goals that nobody else knows about, and not have to mention them if they don’t become a reality.
If you want to do everything you can to make sure your goals are met, ask the person (or people) you are sharing your goals with to help hold you accountable! Choose a date that you will check-in to update them on your progress. This can be the date you set for your completion, or earlier than that to help keep you on track.
Reflect on your financial goals often and realign throughout the year
Your thoughts are powerful for shaping your future, so make sure to keep your financial goals top-of-mind. It is easy to go adrift, especially over the course of an entire year. Regularly checking in with yourself and your goals is like a course-correction.
Think of a ship sailing across the ocean. It cannot see it’s the final destination. In order to reach it, it regularly realigns its coordinates. You are the same way, sailing towards your financial goals. Realigning yourself throughout the year will help you get to your final destination.
It’s easy to start the year inspired, hopeful, and gun-ho towards your new financial goals. But, as time goes on, our primitive human tendencies kick in, which can often derail our progress. To try and counter this, consider writing notes in your planner and calendar. Mark the dates you will be having financial check-ins, and the dates you want your goals achieved!
If you have set large goals, consider breaking them down into quarterly or monthly figures too. Make notes of these smaller goals, and see how close you are when you do your financial check-ins.
Your mind is one of the most powerful (and affordable) tools at your disposal! Your thoughts will dictate your actions, and your actions will form the results you see. Believing your goals are possible, or better yet- that you have already achieved them, will keep you aligned with your financial goals.
Imagine achieving your goals often. Soak in the good feeling of success! Express as much gratitude as you can. And good luck with your financial goal setting for the year!