Given all that’s gone on in 2020, it’s safe to say that no one really knows what the future holds. Still, I’ve always been a goal setter especially when it comes to my finances. Here’s how you should set your 2021 financial goals.
However, the fact is that life doesn’t always go as planned. Your plans and goals may change over time. So is there even a reason to set goals in the first place?
I will always be a person who sets goals. Even though only 2 out of every 10 people who set goals reach them, I know that the success rates are probably even lower for people who don’t bother to set goals at all.
Most of my goals involve money so they end up becoming financial goals. Here are some key things to consider when setting your 2021 financial goals for the year even though the future is always uncertain.
Less Is More
Always keep this in mind when setting financial goals. When you focus on doing too many things with your money, it could hinder your progress in each of those areas. Even if have multiple financial goals to accomplish, try to limit it to just one main financial goal or two at most.
Save $1,000, pay off a debt, max out your retirement. Whatever the goal is, you can eliminate distractions or feeling the unnecessary pressure to do too many things.
If you happen to reach that one financial goal before the end of the year, consider setting the next goal or just take some time to celebrate your success.
Even if you don’t reach that goal, you should still acknowledge your progress and track the positive things you were able to do. Sometimes it takes longer than a few months or a year to reach a financial goal and that’s okay. But be realistic and don’t try to hold yourself to impossible standards.
Set a Goal of Showing Grace
I feel like if you’re going to set 2021 financial goals you need to also set a goal to give yourself some grace when needed. This may look different for everyone, but you should expect that there might be obstacles and setbacks that you need to overcome.
There will be times when you may go over your budget, not feel like working on your side hustle, or just fall off track overall. Again, holding yourself to impossible standards is not the solution.
Plan out ways that you can give yourself grace during tough times when you need it most. Some things I do to show myself grace even while working toward important financial goals include:
- Not scolding myself if we go over on a budget category like food – we are naturally pretty frugal and eat at home most of the time. If there’s a rough day when I don’t feel like cooking, I will order food or dine out and not feel guilty about the unplanned expense. It doesn’t really make a big difference to our financial plan in the long-run.
- Not working late on my business or pulling all-nighters – even if it means I could make more money
- Giving myself an allowance to make small splurges – I like to pay myself first so that means I tuck away the amount we’re going to save first then we budget with the rest of our money.
RELATED: 5 Financial Goals for the New Year
Make Sure You’re Setting a Good Financial Foundation
Before you set 2021 financial goals, make sure you’re setting up a strong foundation. If you want to save $10,000, this means you’ll need to already have a good savings habit established and be dedicated to making consistent progress.
If you’re looking to spend less, pay off debt, or save for a large purchase, you’ll need strong budgeting and money management skills. Don’t wait until a new year to work on building this foundation.
Start building healthy financial habits now. Read books, watch videos, take courses, and develop a money management system that works for you. Do your research and see how you can work backward to reach your financial goals in 2021.
Consider This Next Year as Just one Piece of the Puzzle
Regardless of what the year looks like, it’s just one piece of the puzzle when it comes to the grand scheme of things. One thing I’ve always tried to do was enjoy the present but also work toward a better financial future.
You’ll definitely want to establish your 5-year plan and include bigger long-term financial goals. Realize that the next 12 months will just be a fraction of your journey. I like to think of financial goal setting and the action steps I need to take as a throttle.
Any time when you’re at a point in your life where your bills are under control, try to maximize your savings and emergency funds, max out your retirement contributions and look for ways to invest. On the opposite, when you are not doing so well financially, scale back a bit, find opportunities to cut unnecessary expenses, and utilize your emergency fund.
What are your financial goals for 2021? How will you work toward them while also giving yourself grace when unforeseen circumstances may come up??