5 financial goals for the new year

December 01, 2022

Making a plan for your money can help you take control of your finances.

 

The beginning of the year is great time to get your finances in shape. And the best place to start is by setting financial goals. Whether short-term, long-term or somewhere in between, financial goals help you identify what you want to achieve with your money and become the foundation of your financial plan.

If setting financial goals is new to you, these five goals can start you on the path to a more secure financial future.

 

1. Get organized


If you’re not already doing so, tracking your spending is a good first step in taking control of your finances. You might be surprised to see how much you’re spending on both your fixed (essential) and discretionary expenses every month.

Once you know what your expenses are, stay on top of tracking them by putting a budget in place. You could use a spreadsheet, your bank’s online or mobile app or other budgeting app to monitor your expenses and build out your goals. A good rule of thumb is to keep essential spending at 50% of your income, discretionary spending at 30% and save the remaining 20%.

 

2. Establish a monthly emergency fund


Establishing an emergency fund is critical to ensuring your financial plan doesn’t veer off track if/when something unexpected comes up. This type of goal is a need and should be prioritized.

Ideally your emergency fund has enough to cover three- to six-month’s worth of daily expenses. Determine your overall target and figure out how much you can allocate each month to help you get there. Then, set up an automatic deposit to a designated savings account. You could even consider opening a money market savings account to take advantage of the higher interest rate compared to a standard savings account.

Achieving this goal may help you be better prepared to pay your bills and other necessities if an unexpected event happens. 

 

3. Choose a strategy for paying down debt


Did you take on more debt last year than you wanted? Or haven’t paid down existing debt as quickly as you’d like? Either way, you probably know that having a lot of high-interest debt can get in the way of your financial goals. 

Consider developing a debt strategy for the year. For example:

  • Focus on paying down accounts with a high interest rate first (credit cards, for instance).
  • Pay off a little more than the minimum balance each month.
  • You may want to look into consolidating your debt, which allows you to pay your debts in one monthly payment rather than keeping track of multiple due dates and interest rates.

 

4. Upgrade your investment contributions


Whether you’re just starting to invest or want to make some changes to your portfolio, it’s important to incorporate an investing strategy into your yearly financial plan.

Determine how much you can invest and which accounts those contributions will go to:

  • Start by contributing to an employer-sponsored retirement plan, if one is offered. If you’re already contributing, increase the percentage if you can.
  • If you have an HSA, consider maxing out your contribution. HSAs allow you to pay for qualified medical expenses pre- and post-retirement. The money you invest in an HSA is tax-deferred and it can be used tax-free.
  • If you have children, consider opening and/or contributing to a 529 plan. Once after-tax dollars are put into this education fund, any gains are tax-deferred, and funds can be used tax-free when applied to qualified education costs.
  • If you have extra income you want to invest, consider opening a robo-advisor account.

 

5. Save for something special


Saving for a short-term goal, such as a vacation or a new car, can be a great goal to keep you motivated. 

To ensure you reach it, you can set up:

  • A target date timeline for achieving your savings goal.
  • An amount to set aside from each paycheck or each month.
  • An account to keep those funds.

Opting for direct deposit to a separate savings account is one good way of making sure you stay on track to reach your goal. Once you’ve started on this goal, you can make it a long-term habit. Just check in regularly to ensure your “something special fund” doesn’t interfere with your financial priorities.

 

Want to keep building your financial goals? Take this financial fitness quiz to find out where you’re at and what you can do to to build a stronger financial future.

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