What was 2013 like for you financially? Are you in the black or the red? Did you accomplish your financial goals?
We’re rapidly approaching the end of 2013, and many of us will be on vacation. After all of the hubbub of shopping and gifting, the holidays are a good time to take stock of your financial life over the past year and look ahead to what you want to accomplish for 2014.
Here are a few tips to help get you ready and plan for 2014.
Take a financial retrospective and reflect on what you did well, what could be improved, and what were failures. Look at the bigger picture: did you make your savings and retirement goals? How much of your debt did you pay off? Plan for recurring expenses by building them into your budget, and finally make SMART financial goals instead of resolutions.
Look Back: A Financial Retrospective
When you’re getting ready to set up your goals for 2014, it’s helpful to look back and take stock of how 2013 went for you. Borrowing an idea from Agile methodologies in software development, take a financial retrospective. Did you accomplish what you wanted to accomplish in 2013?
Think about these questions:
- What did you do well?
- What were your failures?
- What could be improved?
- What lessons did you learn?
- What blocked you from accomplishing your goals?
For example, let’s say you wanted to pay off your credit card debt in full, but you only managed to pay off 75%. What happened in those months where you weren’t able to make that payment? Perhaps you had an unexpected emergency: the car broke down, or you had to go to the hospital.
What could you improve from this experience? Going into the next year, you could plan for unexpected emergencies by building up your emergency fund. Taking a retrospective allows you to think about your financial patterns and understand what is keeping you from your goals.
By doing this exercise, you’re sure to learn from your mistakes and celebrate your wins.
Look at the Big Picture
Your financial goals are important to your overall wellbeing and lifestyle. Take this time to re-evaluate them and what they mean to you. If you didn’t set yourself financial goals in 2013, read on—we’ll talk about how to set actionable goals.
It’s likely you’ll have different goals for the next year. Again, think about what you accomplished and what could be improved. What does financial freedom mean to you? What are your immediate goals and your long-term goals? Are your immediate goals helping you get to your long-term goals? If not, you need to re-evalaute.
Make SMART Goals (not resolutions!)
We all love to make resolutions, but most resolutions are like wishes. They reflect the version of ourselves that we wish we were: thinner, wealthier, etc.
So instead of resolutions, make a SMART goal:
What does this look like in action? Let’s say one of your financial goals is to build up your emergency fund. Here’s what that would look like in regular, slightly hand-wavy goal-setting:
I will build up my emergency fund.
This kind of goal is actually hard to measure or track, because it’s too vague.
Let’s try again.
I will set aside $200 for my emergency fund every month.
You can see the difference here. The second example has several factors that make it SMART: it’s specific, it’s measurable, and there’s a set time. If you don’t contribute $200 one month, you’ll instantly know that you didn’t make that goal. And of course, you can change the amount to whatever amount you think works for you to take care of the attainable and realistic aspects.
Finally, one important part of SMART goals is setting up regular times to check in on your progress and evaluate how you’re doing. One good way of doing this is to pair up with a family member, trusted friend, or even your accountant. Checking in with another person will keep you accountable.
2014 will be a new year, for you and your finances. We hope these tips will get you off on the right start!
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