How to Set Financial Goals for the New Year in 6 Easy Steps

The new year is right around the corner, and many are looking for that perfect “fresh start” to start working on their new year financial goals and resolutions.

I personally love the feeling of a fresh start. It gives you a chance to reflect on the last year and make plans to improve your life.

New planners, goals, and having fresh new year Roth IRA contributions open for investing make my type-A soul so happy.

Of course, you can choose to improve your life at anytime, not just on January 1st.

Whatever your opinion on new year’s resolutions are, it is important to set financial goals for the new year.

Our society is so focused on just making monthly payments and barely getting by, that it’s so easy to lose sight of your big-picture goals.

Your long-term financial goals should drive your monthly budget, not the other way around.

This year, I want to challenge you to think beyond just the monthly payment.

Setting new year financial resolutions is a great way to do this with the added motivation of a new year!

This post will walk you through the step by step process of setting financial goals for the new year.

What are Financial Goals?

A financial goal is a specific, measureable milestone that brings you closer to your dream future once you hit it.

It is not your monthly budget or spending plan. Although your financial goals will be included in your monthly budget.

A series of financial goals makes up a comprehensive financial plan and gives you the freedom to live your life the way you see fit.

Your financial goals should be specific, measureable, achievable, relevant, and have a timeline associated with them. In this case of yearly financial goals, your timeline is 1 year.

Don’t just say, “I want to save more money this year.” How much? For what? When do you want to have $X amount saved?

It’s so important that your new year financial goals have a clear purpose with a number AND timeline next to it.

Examples of New Year Financial Goals

Here are a few examples of financial goals that someone could achieve in the new year:

• Paying off your $5,000 credit card debt in 4 months using the debt snowball or avalanche method
• Maxing out your Roth IRA for the first time ($6000 saved over the course of the year)
• Saving $15,000 for a home downpayment in 1 year
• Earning a $100,000 in income this year
• Building a $10,000 emergency fund over the next 8 months

Notice how each of those goals has a specific number and realistic timeline next to it?

Asking yourself why, how much, and when will give you a clear plan to follow so you can achieve your financial goals. This will also help keep you motivated on your financial journey since you can track your progress.

Related: 5 Personal Finance Goals for Complete Beginners to Crush This Year

How to Set Financial Goals for the New Year

Setting financial goals is all about envisioning what you want out of life and creating a plan to actually make it happen.

So, what do you want out of life, friend?

I know, it’s a loaded question. And it’s totally okay to not quite know the answer to this!

The goal is to set a general direction for your life and work toward that.

You can always change that direction at any time.

For example, I assume that you don’t want to work a traditional job forever. So saving a certain percentage of your income for retirement might be one of your financial goals this year.

Maybe you want to retire early, but don’t know exactly how early. Well, you know that it’s going to require investing your money into retirement accounts NOW, so that you don’t have to work LATER.

Do you want to travel internationally often? Become a homeowner one day? Stop stressing about your finances and debt payments?

All of these goals have one thing in common: they require money, time, and planning.

So let’s set some financial goals for the new year! This 6-step process will walk you through exactly how to set some yearly financial goals for the new year.

1. Understand Your Current Financial Situation

Before we get too crazy setting goals, you first need to get a clear picture of your current financial situation.

Start by answering these 3 questions:

• How much money do you bring home each month/year?
• How much of it do you spend?
• How much is being saved or invested for the future?

Answering these questions is absolutely crucial before you start setting goals. You need to know how much disposable income you have to allocate to those goals.

Your paystubs, tax return, credit card/bank statements, and retirement account statements will help you paint an accurate picture of your finances.

This monthly budget template will help your organize your finances all in one place! It’s a spreadsheet that works in Google Sheets or Excel and is very beginner-friendly.

2. Determine Your Financial Goals for the New Year

Now that you have an idea of how much money you make, how much you spend, and how much is left over for your financial goals, it’s time to sit down and think about what you want to achieve this year.

Based on your current financial situation, what needs to change in order for you to make progress financially?

I know we talked about some financial goals in the section above, but here is a high-level road map of what I would focus on first:

1. Make sure you have an emergency fund. Start with $1000 and then work your way up to 3-6 months’ of expenses.
2. Pay off any high-interest debt. I’m mainly talking about credit card debt here, but I consider anything over 6% (excluding a mortgage) to be high interest.
3. Make sure I’m investing enough in my 401k at work to get my full company match.

After doing these 3 things, the next set of goals is up to you!

Maybe you have a large purchase to save up for, like a car, wedding, or a home down payment.

Maybe you want to start investing more for retirement.

Are your debt payments eating up too much of your income? Paying off some of those loans faster can relieve some pressure on your monthly budget.

Think about where you want to be in 1, 5, and 10 years. What do you need to be doing now to reach those goals?

3. Prioritize Your Financial Goals for the New Year

Choose a few financial goals for the new year to work toward. Make sure they make sense for your financial situation, lifestyle, and stage of life.

I recommend choosing 1-3 goals to really focus on.

If you try to do 10 things at once with your money, it’s hard to stay motivated because each goal will take a lot longer to reach.

You can either tackle one goal at a time, or work on a few at once.

I’ve found that the one at a time method works really well for debt payoff goals, because paying off each loan gives you the dopamine hit you need to keep going with the next one.

The all at once method can work well for saving and investing goals, like sending $500 per month to your Roth IRA and another $500 per month toward a home down payment savings account since it’s easy to automate.

Of course, you know yourself best, so if you’re more likely to stick with your goals by focusing on one at a time, go for it!

4. Make Your Yearly Financial Goals SMART Goals

Your yearly financial goals should be SMART goals:

• Specific (be for a specific purpose)
• Measureable (have a dollar amount associated that you can track)
• Achievable (be realistic for your financial situation)
• Relevant (be in line with your personal goals and stage of life)
• Timely (have a timeline associated with each goal)

Once you translate your financial goals into SMART goals, you’ll have a very clear target to work toward in an alloted timeframe.

Going through this exercise ensures that your goals are actually achievable and in line with your overall vision for yourself and your future. You can hold yourself accountable by assigning a timeline and dollar amount to each one.

Instead of “I’m going to become debt-free this year, your goal will sound like, “I will become debt-free this year by allocating an extra $800 per month to my debt snowball for the next 12 months.”

Make sure you also write your goals down. Studies have shown that you are 42% more likely to reach your goals if you write them down.

5. Add Your Yearly Financial Goals to Your Monthly Budget

Now that you have SMART financial goals for the new year clearly defined, add them into your monthly budget.

This step is simply a way of breaking up a large goal into smaller, acheivable goals that you can track over time.

Here’s how you break up a yearly financial goal into monthly targets: Take the total amount needed to meet your goal, and divide it by the number of months until you want to reach that goal.

To get a monthly goal, divide all of your yearly financial goals by 12.

If your goal is to save $10,000 for your emergency fund this year, make sure you have $833 allocated to savings in your monthly budget.

Related: How to Make a Zero Based Budget (With an Example!)

6. Track Your Progress

I’m a firm believer that what doesn’t get measured doesn’t get managed.

With any goal you set, it’s important to track your progress and adjust the plan along the way.

Make sure you’re checking in with your goals and your budget throughout the month! When something changes, update your budget and your goals if you need to.

There is no shame in adjusting your goals as you go.

You have to work to create a budget that works with your lifestyle, while also accomplishing financial goals. This might take some practice, but you’ll get better at budgeting over time.

Your financial future is worth it, I promise!

Setting yearly financial goals for the new year doesn’t have to be overly complex or daunting. It’s not the most exciting or sexy topic, but it is so important.

Figure out how much money you make and what your expenses are.

Once you know those two numbers, you can begin planning what you want your future to look like and start allocating money toward those goals.

Breaking down your yearly goals into a monthly spending plan will help keep you accountable and give you a clear roadmap to achieve them!

If you have big dreams to retire one day, buy a home, or save for your future kids’ college, you NEED to create a plan to make those dreams happen.

You can do this!

What is one of financial goals for the new year? Let me know in the comments below!

-Megan

This post was all about how to set financial goals for the new year in 6 steps.