As we settle into the new year, many of us are still reflecting on our resolutions. But let's face it: most resolutions fizzle out before January ends. This new year, let's embrace a fresh approach to our financial future – one that's built for lasting change and success.
Understanding Resolutions, Goals and Intentions
Resolutions are typically vague and often disconnected from our deeper motivations. They are things we think we should do, such as "save more money," but lack specificity and personal meaning.
Financial goals are specific and measurable. They follow the SMART criteria: Specific, Measurable, Achievable, Relevant and Time-bound. For example, "save $5,000 for an emergency fund by December 31."
They help us understand why we are setting certain goals. An intention might be "to create financial security for my family" or "to have the freedom to pursue my passions."
Understanding our financial intentions is crucial because it allows us to set goals that truly matter to us. When our goals align with our deeper intentions, we are more likely to stay motivated and achieve them.
Setting Age-Appropriate Financial Goals
No matter your age, setting clear, intention-based financial goals is key to success. Here's some guidance based on different life stages:
18-Year-Olds: As you enter adulthood, commit to spending less than you earn and start saving, even if it's just small amounts. Create a budget to give your money purpose and be diligent about student loans, borrowing only what you absolutely need.
Early 20s: Focus on educating yourself about financial terms and concepts. Create a strategy for paying off debt, especially student loans, and taking full advantage of any employer-matched retirement contributions offered at your first job.
Mid-20s: Now's the time to increase your retirement savings – even a 1% increase each new year can make a significant difference. Consider consolidating any 401(k)s from previous employers, and develop a solid strategy for repaying your student loans.
30s: Aim to max out your retirement accounts if possible. If you have children, start planning for their financial future by considering options such as 529 plans. Work on eliminating any lingering debt from your younger years.
40s and Beyond: Reassess your retirement goals and adjust your savings strategy if needed. If you're 50 or older, consider making catch-up contributions to your retirement accounts. Review your insurance coverage, including life and disability insurance, and start estate planning if you haven't already. Focus on eliminating all high-interest debt and, if you have college-age children, strategize for education expenses without compromising your own retirement savings.
Remember, these are not one-size-fits-all solutions. Your financial journey is unique, and your goals should reflect your personal circumstances, values and intentions.
Putting It All Together
As you set your financial intentions for the new year, think beyond just the numbers. Consider what financial stability and success mean to you. Is it freedom to travel? The ability to support causes you care about? Or perhaps it's the peace of mind that comes from knowing you're prepared for whatever life throws your way.
Start by identifying your core financial intentions. Then, use these to create specific, measurable goals that align with these intentions. For instance, if your intention is to have the freedom to travel more, your goals might include creating a dedicated travel fund, increasing your income through a side hustle or reducing expenses in areas that don't align with this intention.
Working with a CERTIFIED FINANCIAL PLANNER® professional can be invaluable in this process. They can help you uncover your true financial intentions, create a comprehensive plan that aligns with these intentions, and provide expert guidance and accountability along the way. Remember, progress is more important than perfection. There will be challenges and setbacks, but with clear intentions, specific goals and the right support, you can navigate them successfully.
This new year let's move beyond vague resolutions. Instead, set clear, actionable financial goals based on your deepest intentions. It's not just about improving your bank balance – it's about creating a life that aligns with your values and aspirations.
Here's to a new year of financial growth, learning and prosperity!
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