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You started the year gung-ho on your money goals. You resolved to spend less, save more, pad that nest egg and finally build your emergency savings to six months. So now that we’re into the last three months of the year, how are those goals coming along?
If that question prompts more of a sheepish smile than a proud one, don’t worry, we get it — your ambitions may have been bigger than your reality or maybe you were thrown by some financial curveballs earlier this year. In fact, according to Fidelity’s 2016 New Year’s Financial Resolutions study, 59% of those who didn’t stick with their money resolutions last year said unexpected expenses were to blame; another 42% said they set goals that were too hard to sustain over the long run.
Now that we’re nearing the end of the year, you might be tempted to raise your hands in surrender and just hope for a clean slate next year. But don’t give up yet; it’s not too late to get back on track. Check out our tips on how to course-correct between now and December 31st — and how to gear up for an even better New Year.
Step 1: Figure Out How Off Track You Are
Before you can come up with a plan to get on track, you first need to know just how far off you are. So start taking stock of your financial data, says financial planner David Blaylock, CFP®.
For example, if your goal was to increase your net worth, then calculate your net worth by adding up all the money you have in your checking, savings, investment and retirement accounts and subtracting all your debts. If your goal was to eat out less, see how much you’ve been spending in that category, perhaps by reviewing your credit card purchases and take-out app history or estimating how much you’ve been paying each week, if you tend to use cash. If your goal was to pay off loans or credit cards, check to see where your balances stand.
The key is to get a handle on the numbers. “Information is power and that’s why you want to gather your data,” Blaylock says.
Step 2: Assess Why You Got Off Track
Now that you know your numbers, it’s time for some self-analysis to figure out what might have thrown you off in the first place. You might be able to pinpoint a specific cause, such as getting blindsided by a broken carburetor or chipped tooth — which, by the way, is why you should have an adequately stocked emergency fund.
But if you’re not sure what the culprit is, Blaylock offers this educated guess: You may not have had a specific action plan in place to reach your goal. “People will often come up with a really broad goal like, ‘I want to save more money,’ but don’t have any idea how they’ll accomplish that,” Blaylock says. “Or they’ll say, ‘I don’t want to spend so much on groceries,’ but won’t get really specific on what that looks like — as in, then how much do you want to spend?”
If you did come up with a plan, perhaps the issue was that it wasn’t sustainable for the long run. “I think that most of us are really good at mapping out the next one or two steps as part of an action plan,” Blaylock says. For instance, to cut down on eating costs, perhaps you resolved to start bringing lunch to work every day. The problem? “We’re not forward-thinking enough to address what else we can do, or how we’ll diversify our meals enough so that we won’t get tired of them.” Without that next level of thinking, you might get so sick of packing the same salad every day that you end up binging on pricey lunches out for a week straight.
The bottom line: If you know what your previous pain points were, you can try to work around them in your next plan of attack.
Step 3: Hit the Reset Button
Depending on how far off base you are, it may be worth it to simply revise your financial goals in a way that makes them more reasonable and achievable.
Blaylock is a fan of the SMART system, which advocates setting goals that are Specific, Measurable, Attainable, Relevant and Time-bound. For example, if your New Year’s resolution was “I want to save more money,” you could make it SMART by refining it this way: “I want to save $200 for the next three months so that I’ll have $600 to put toward a winter ski trip with my family.” Maybe your original goal was to have $1,000 by year’s end, but the key here is the “A” — your goal needs to be attainable, otherwise you risk getting discouraged again.
And there’s no need to wait until the New Year to get the ball rolling on a goal. If you want to go ahead and commit to saving $2,400 over the next 12 months, then do it. “When people want to reset their goals, they sometimes say, ‘Oh, I’ll reset that as of January 1,’” says Blaylock. “They want to give themselves an out, like starting a diet ‘next month.’ But that’s just wasted time.”
Step 4: Set Weekly Milestones
Oftentimes, people get derailed because they don’t track their progress frequently enough. Indeed, in the Fidelity study, more than a third of those who didn’t achieve their financial goals last year said it was because they didn’t set milestones.
So to help prevent those moments where you realize you didn’t hit your target until the end of the month — after it’s too late to do anything about it — Blaylock recommends breaking down your goals by the week. Think about it: “Most of us don’t say, ‘I’m going to the gym for 15 hours over 30 days,’” Blaylock says. “It’s probably better to say, ‘I’m going to go to the gym three times a week.’”
So if, for example, your financial goal is to spend no more than $1,000 a month on discretionary costs (happy hours, clothes shopping, concert tickets, etc.), it’s easier to tell yourself you’re going to limit those purchases to $250 a week. “This way, one day a week, I can look at my spending and say, ‘Hey, I’m on track!’ ” he adds. “It’s much harder to correct the course if you wait a whole month.”
Step 5: Automate What You Can
We could all use a little extra help when it comes to inching toward a goal, “so evaluate where you can automate things to make your financial life easier,” Blaylock says. For instance, you could set up automatic payments toward a credit card that you’re trying to pay off by the end of the year or beef up your retirement fund through direct contributions that come out of your paycheck. The more you can make your goal progress a no-brainer, the better.
Ultimately, the end game for goal resetting is to instill financial habits in yourself that will eventually become second nature — perhaps to the point where you may not even have to make them into special resolutions anymore. Says Blaylock: “What you’re trying to do is have these habits in place by [the New Year], rather than start over.”
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.