How to Set Better Personal Finance Goals for 2019
Find out how to create financial goals you can stick with and achieve. Money Girl Laura Adams offers essential tips plus her 7 personal finance resolutions in 2019.
Laura Adams, MBA
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How to Set Better Personal Finance Goals for 2019
If you’re like many people, you want more health, wealth, and wisdom this year. But as January comes to a close, you may already be losing sight of your New Year’s resolutions. Or maybe you didn’t create any goals in the first place. Well, it’s never too late!
I can’t help you with health or wisdom tips—you’ll need other other experts, such as the Nutrition Diva, Get-Fit Guy, and Savvy Psychologist, for those. But I can make it easier for you to create and accomplish better money goals. Keep reading for tips and to find out my personal financial goals for 2019.
Tips to Set Better Personal Finance Goals
Setting financial goals can feel overwhelming because it requires some deep thinking. The best goals resonate with you on an emotional level, which makes them easier to remember and keep. You have to get to the core of what you truly want and the envision the outcomes you desire.
Improving your finances comes down to three steps:
- Understanding what your financial situation is today.
- Knowing where you’d like your future financial situation to be.
- Acting on what needs to be done to bridge the gap between the two.
The first step in setting goals is getting organized so you can assess your level of financial fitness.
Here’s an excerpt from my new book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, that will give you a bird’s eye view of your finances and create more meaningful goals:
I’d like you to take a step back and look at your financial life holistically and create an overarching financial plan. Why is a financial plan important? Think of it this way: If you were building a new home, would you pour a concrete foundation before having finalized your house plan?
That would be extremely risky and probably leave you with some major design flaws and regrets. Creating a financial plan is just like having a detailed house plan—it shows what you intend to create with your money. It’s part of the process of identifying your goals and determining how you’re going to manage your money to achieve them.
Financial planning may seem boring, but you just have to hunker down and do it if you want to make the smart moves necessary to live a financially secure life. It’s possible to get lucky and end up having enough money to reach dreams, such as retiring with a big bank account or becoming debt free, by chance. But I wouldn’t count on it!
Financial planning doesn’t have to take a long time or be complex. You don’t have to be a financial whiz or have a high-paying job in order to achieve your financial goals. Simply reflect on the big picture of your life. What financial and non- financial dreams do you have?
A useful exercise is to imagine your life five years from now. Consider where you’re living and how you spend your time. In five years, what would you be proud to say that you had accomplished between now and then?
Stretch your imagination out further and do the same for your life in 10 or 20 years. Then imagine you’re on your deathbed with just a few hours left to live.
What accomplishments would make you feel good about yourself even in your final hours? These questions can give you important information about yourself and inspire you to begin planning for what truly matters to you.
What accomplishments would make you feel good about yourself even in your final hours? These questions can give you important information about yourself and inspire you to begin planning for what truly matters to you.
This exercise will help you identify all your financial goals, big and small, so that you know what you’re working toward.
There are three different types of goals to consider when you’re doing financial planning: short-term, medium-term, and long-term.
Short-Term Goals
Short-term goals are those you want to achieve within a year. They could be getting out of credit card debt, maxing out a retirement account, or creating a holiday gift-giving fund, for example.
Two of the most important short-term goals that I recommend you achieve are establishing an emergency fund and substantially reducing or eliminating any dangerous debts you may have.
Medium-Term Goals
Medium-term goals are those you want to accomplish in the range of one to five years in the future. For many, a year isn’t enough time to save up an adequate emergency fund, and so that objective might be a medium-term goal.
Other examples of medium-term goals that you may have in mind are making a down payment on a home, starting your own business, buying a new car, or saving for your children’s education.
Long-Term Goals
Long-term goals are, of course, those you want to achieve beyond five years into the future. The granddaddy of all long-term goals is saving for retirement.
To get started, download the free Financial Planning Workbook (PDF) and set aside at least 30 minutes during a quiet part of your day to complete it. If you have a spouse or partner who shares your financial life or goals, you may want to complete your financial plan together. It will prompt you to ask yourself crucial questions and take the time to answer them as thoughtfully as possible.
Laura’s Financial Goals for 2019
When I ponder the questions in the Financial Planning Workbook each year, I find that my definition of success is freedom. The goals I want to achieve will allow me to:
- Have the flexibility to work on projects that I find meaningful (like the Money Girl podcast)
- Work remotely most of the time
- Travel more often with family and friends
- Partner with companies that share my mission and passion for financial education
- Live an urban lifestyle that allows me to walk more and drive less
For some, success might be living in a huge house and driving a fancy car. Others might want to own a business or pare down expenses to a minimum, so they never feel stressed about having to maintain a high income. Make sure your financial goals align with the future you envision for yourself and your family.
Here are some of my financial resolutions:
Resolution #1: Update my Personal Financial Statement (PFS)
If you’re a regular Money Girl podcast listener or read my books, you know that I recommend using a PFS as the cornerstone of your financial plan. This is the most important tool for getting organized and gauging your financial health.
Every time you update your PFS, you calculate your net worth. The definition of net worth is summed up in a very simple formula: Net worth = Assets — Liabilities
Your assets are items of value that you own. Your liabilities, on the other hand, are the debts that you owe. When you subtract your total liabilities from your total assets, you’ve figured your net worth. The goal is to slowly raise your net worth by increasing your assets and reducing your debts.
Resolution #2: Max Out Retirement Accounts
My husband has a 401(k) and I have a SEP-IRA and we’re committed to contributing the maximum amount every year. We review the limits (which went up slightly for 2019) and adjust our automatic contributions so they go into effect in early January.
The New Year is the perfect time to increase your retirement contribution rate from the prior year. For instance, if you contributed 3% last year, make sure to bump it up to at least 4% this year.
Many people get cost-of-living salary increases or year-end bonuses that take effect in January. So, it’s probably the best time of year to increase your savings. You probably won’t even miss the money.
But if you do have a financial hardship, you can always reduce your contributions or stop making them altogether. Push yourself to save until it hurts. If you’re not feeling a little pinch, you’re probably not saving enough.
While the deadline for workplace plans coincides with year-end, for IRAs and most plans for the self-employed, you have until April 15 to make contributions for the prior year.
Resolution #3: Max Out My Health Savings Account (HSA)
If you have a high-deductible health plan, you’re probably eligible for an HSA. These terrific accounts allow you to save funds that can be spent tax-free on qualified medical expenses.
If you still have money in your HSA when you’re 65 years old, it can be used for non-medical expenses without penalty (but income tax would still be due), similar to a traditional retirement account. Just like with many retirement accounts, you have until April 15 to make HSA contributions for the prior year.
Resolution #4: Prepare for Taxes
Every year I make a goal to begin working on my business and personal tax documentation as early as possible. Business tax returns are due in mid-March. So, I work on those first by making sure that all tax-related expenses are categorized correctly and running reports for my accountant.
For as long as I can remember, I’ve had to file a tax extension on my personal return because I didn’t receive all my tax forms in time. This year I’m aiming to have it filed by the mid-April deadline.
Resolution #5: Pay Off Credit Cards in Full Each Month
I use credit cards for every expense possible because I love getting the rewards. But the downside is making a large expense that you don’t pay off in full and having to pay a finance charge.
One trick that’s worked for me is using a charge card that must be paid off in full each month, such as the American Express Platinum card. It comes loaded with rewards, but you typically can’t carry a balance from month to month.
Resolution #6: Review Subscriptions and Automatic Payments
Having certain payments on automatic renewal is convenient. But the downside is that you can forget who and how much you’re paying.
The New Year is a great time to review your recurring charges and cancel any that you aren’t using, such as gym memberships, entertainment streaming, magazines, or business services. It’ll feel good to review and clean those up.
Resolution #7: Use What I Have
One goal that I’m going to work on this year is using up what I already have before buying something new. For instance, I love buying cosmetics and hair products, but I already have buckets of them. I’m going to use up that bottle of serum before buying a new one.
My financial goals are pretty similar from year to year. I want to save as much as possible and make sure that my debt levels go down.
Because I max out my retirement accounts each year and have a cash reserve, I don’t follow a budget. I have a top-down approach where I fund my goals first and then live on the rest. However, creating a budget may be an important goal for you that will keep all your other financial goals on track.
If you’ve never created a budget, try using Mint, which is a free app that aggregates your transactions from any linked account and allows you to set a budget. Quicken is a more robust financial program that allows you to create and monitor a budget, create reports, track investments, and many advanced functions.
If you don’t enjoy monitoring your cash flow by specific categories, one technique is to use a 50/30/20 spending plan. With this approach, you lump a variety of expenses into one of three categories: fixed expenses, variable expenses, and savings.
You’d spend 50% of your take-home pay for fixed expenses, such as housing, food, transportation, insurance, and debt payments. These are your necessities and everyday living expenses.
You might spend 30% on variable expenses, such dining out, entertainment, and clothes. These are nice to have, but not essential. And the remaining 20% would go toward retirement savings and building an emergency fund.
If this simple technique helps you get started with a spending plan and watch your cash flow more closely, it’s a win. Then you can refine your budget later on if you decide that you want to measure specifics, such as how much you spend at Starbucks, on makeup, or on drinks out with friends.
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Smart goal setting image courtesy of Shutterstock
About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.