Whether you’ve lost a job, landed a great new job, bought a new house, or made an expensive cross-country move in the last year, we all encounter “unforeseen circumstances” that arise that can wreak havoc on our budgets. For example, when our income and spending needs change, we often lean on our emergency funds to make end’s meet, or make sacrifices in certain areas to ensure our basic needs are covered.
Thankfully, when we have a goals-based financial plan, we can use our big goals as a beacon to help us reset and get back on track when our finances shift. But going into a New Year with goals that are too enormous or even audacious — like saving $50,000, or paying down all of your debt in six months — may actually have the opposite effect, and could even set you up for failure. That’s because when we see we’re falling short of our goals, it can be a confidence-killer, and lead us to make poor decisions with our wallets. So, if you’re ready to set a goals-based financial plan for yourself, instead of starting with THE ultimate goal on your to-do list, it’s best to start small, and know that a successful financial life is a marathon, not a sprint. Here’s a look at how to set realistic and manageable aspirations, all of which can be signed, sealed and delivered before the beginning of 2025.
Sit down and figure out why you’re saving
As with anything in life, knowing the reasons you’re motivated to work toward a goal will help you remain focused, motivated and inspired. That’s why wealth advisor Julia Pham suggests taking the time to soul search and evaluate what financial milestone you dream of reaching. “Everyone is different, so that may be paying off debt, saving for a house, or retirement savings,” she explains. Then, with this in mind, you can start to gradually inch closer to where you hope to be. It can also help create a vision board of your ‘why’ so you can see it every day when you’re tempted to stray off course.
Create a budget
One of the most effective ways to add more zeros to your savings account is to track each dollar that goes in, and each dollar that comes out. Many people start keeping a tab on their daily purchases, but then lose track and ultimately find themselves wondering why their cash has seemingly disappeared. To do this, start with how much you would like to save — aiming for 20 percent of your total income — and then make sure your expenses allow you to get there, says Jennifer Dempsey Fox, CFP and president of Bryn Mawr Trust Wealth Management.
If you need to cut back on subscription services or another category of spending to achieve your savings goal, then it’s time to just rip the band-aid off and see if you can live without it. But make sure you’re realistic, Fox cautions. “If you are too aggressive in cutting living expenses, you have made it that much harder to stick to your goals. Track your progress at least monthly and adjust your goal up or down based on your ability to pay your living expenses while saving.”
Prioritize high-interest debt
There’s never a better time to get rid of your bad (read: high-interest) debt than right now, says Lauren Anastasio, certified financial planner at Stash. “Eliminating your high-interest rate debt as quickly as possible will save you money and make it easier for you to accomplish other goals in the future,” she explains. And remember, you don’t need to wipe it out completely (in other words, it might not be completely gone by the end of the year) but you should work to create a game plan that helps you to eliminate it as quickly as you’re able. “By prioritizing paying down your debt you’ll be ensuring that you’ll accumulate less interest and have less total to payback than you would if you were to wait,” she adds.
Join an investment group with others
There’s strength in numbers. You can join an investment group that allows you to educate yourself on how to invest. We know that more women are interested in investing outside of their retirement accounts, yet too many say they lack the confidence to get started. If that sounds familiar, then it’s time to invest together. And that concept of investing together while building confidence is exactly why Jean Chatzky, CEO of HerMoney, and Karen Finerman, CEO of Metropolitan Capital Advisors, launched InvestingFixx, the ultimate investing club where women from across the country are coming together to learn how build a portfolio, speak Wall Street lingo like a pro, and build investor confidence in every class. We’d love for you to join us!
Automate your savings for an emergency fund
It’s both realistic and essential to have a “rainy day” fund, where you stow cash for an unexpected expense or event. If you haven’t yet started stashing money into an emergency fund via automated savings, Pham says this task should move to the top of your to-do list for the year.
“Automate your savings using direct deposit straight into the account. Target an amount equal to three to six months’ worth of living expenses,” she continues. “It’s easier to save when it’s automatically done for you, and you don’t have to think about it.”
MORE ON HERMONEY:
- 10 Ways To Save Money While Also Saving The Planet
- HerMoney Podcast Episode 271: Budgeting Without Tears
- 5 Places to Tighten Your Budget if Your Spending Habits Have Changed
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