The beginning of a new year — or in this year’s case, a new decade — is an appropriate time to pause and reflect with renewed positivity and hope on what the future may bring. For me, January is the time of year when I sit down and set personal and professional goals.
But for so many people, setting and achieving resolutions can feel nerve-wracking or overwhelming, especially when the reality of everyday life sets in. Perhaps it’s the word, “resolution,” that makes the process feel so daunting — the word carries a lot of weight and can make us feel like we have to accomplish every goal we set right away. The stress gets stronger when we review our growing personal and professional to-do lists and wonder how we’ll ever fit it all in.
If you’re feeling this way while staring at your blank resolutions list, pause, take a deep breath and change your perspective. The key to achieving your goals lies in your approach — instead of setting your resolutions with the end result in mind, consider breaking down your goals into smaller steps spread out over the course of the year. Here are a few ways to help you put this approach into action as you embark on 2020.
- Align your financial goals with your personal goals. When your financial resolutions reflect the personal goals you want to achieve, making financial decisions will be a lot easier and more efficient. For instance, if you are striving to eat healthier in the new year, you might link that objective with a financial goal of spending less money on restaurant meals. Cooking healthy meals at home more frequently can help you achieve both goals, enriching your personal and financial well-being.
- Distinguish between short- and long-term-financial goals. Assigning a time frame and priority level to each of your goals improves your chances of achieving them — and once you get started, you’ll likely find the process is easier than you may think. Start by reviewing your goals separately based on time frame and prioritize them based on whether they are short-term (for instance, saving for a down payment on a home) or long-term achievements (such as saving more for retirement). Then, break down each goal into smaller steps. For example, if your goal is to retire by age 60, consider the steps you’ll need to take to get there, such as making the maximum annual contribution to your workplace retirement savings plan and earning the maximum employer match on top of that. You can outline these actions in your financial plan, which can provide the roadmap you need to understand exactly how and when you will accomplish your objectives. Once your goals are all outlined in your financial plan, you can then break down deadlines for achieving them on a monthly or quarterly basis to put you in the best-possible position for the end of the year.
- Make sure your goals are specific and measurable. It’s great if you are striving to save more for retirement or another future goal as you head into 2020. But if you want to boost your chances of success, then you will need to make your goals actionable. Stray away from using vague language to describe what you want to achieve. Ask yourself these questions: What specific steps will you take to reach your goals? What is your definition of success? For instance, instead of saying you want to “save more for retirement,” you could say, “save 10% of my pretax income for retirement.” Instead of saying your long-term goal is to “buy a vacation home,” you could say “earmark all of my restricted stock units (RSUs) that vest in 2020 toward a vacation home purchase.” Transforming your goals into actions puts you one step closer to the finish line.
- Plan for the unexpected. Life can sometimes throw a monkey wrench into the best laid plans. To secure your financial well-being through all scenarios, make sure your goals are flexible and consider what you may need to do if certain assumptions don’t work out as planned. For example, if your financial goals depend on stock compensation or a potential bonus, understand that your odds of achieving your goals will be partly out of your control, due to the nature of those assets. Take care to set aside assets for immediate, high-priority goals, such as your child’s first college tuition payment.
- Stay disciplined. It has been a strong decade for the markets — but as every prospectus warns, “past performance is not a guarantee of future results.” There is no crystal ball that can predict how the market will perform over the next 10 or 20 years. Before we embark on the next decade, take a close and honest look at your short-term and long-term goals. See where you stand now, think about where you’d like to be in the future and rely on time-tested principles for a rewarding investment experience: discipline, diversification, tax efficiency and a long-term focus.
With a new decade on the horizon, new opportunities abound. As you head into the new year, I hope you will find inspiration from the great and challenging times of your past that made you who you are today. I hope these memories will help you face the upcoming year and decade with renewed confidence, hope and excitement. Here’s to an amazing 2020!
Need help setting your financial goals for 2020 or creating a path to success? Contact Freedom Trail Financial today.