3 Steps to Prepare for Financial Success with Goals

by Kevin on January 3, 2011

Welcome to 2011. For some 2010 was a banner year worth celebrating and remembering. For others it is best forgotten to the annals of time. Either way we are in a new year and there’s no bad time to prepare for a great financial year.

Here are three essential steps to making this year a solid one financially through the use of goals.

Don’t Make Resolutions

Did you make resolutions last year? Great, so did I.

Now, how many of those resolutions did you stick to? What did you achieve?

Most people set resolutions. Few, if any, stick to those resolutions long enough for them to translate into habits. I know I didn’t turn any of my resolutions into habits last year.

Goals on the other hand are a completely different beast. Goals are defined. Goals are measurable. Goals lead to success.

When you set goals you have to be careful to avoid setting goals that are really resolutions. A goal of “earn more freelance income this year” isn’t really a goal. It’s a resolution.

Instead you need to set SMART Goals. I’ve written about SMART goals in the past, but here’s a brief rundown. They’re specific, measurable, attainable, realistic, and time oriented.

Here’s an example of one of my SMART goals for 2011: Triple my monthly freelance writing and blogging income by December 31, 2011. Note all the differences between the resolution and the goal. It is specific and measurable (tripling the freelance income), it is realistic and attainable (in my opinion), and it is a time oriented (December 31, 2011).

So get out there and set some specific goals then track your progress toward those goals. It also helps to have someone or a team of someones keep you accountable toward those goals.

Assess Your Financial Situation

Goals put you in motion toward a specificed direction. Before you can have goals you need to know your current situation. It’s impossible to set a direction without knowing where you are currently at.

Starting from scratch to figure out where you’re at can be daunting, but it doesn’t have to be. Take an hour or two on a weekend, look at your bank accounts and credit cards, analyze your spending, and figure out how much income you can consistently depend on every month. Set a budget from there and get back to living life.

Incremental Steps to Success

Remember the A in SMART goals? Attainable. Your goals must be attainable.

Once you’ve assessed your situation you’ve got a starting point to base your goals off of. You now can set attainable goals. If my freelance income is $100 per year and I set a goal of earning $250,000 this year freelancing that’s probably not attainable.

Wanting to make $250,000 freelancing is fine, but you need to set goals as incremental steps to get to the overall goal. I could put a multi-year plan together to get to $250,000 in freelancing income. The first step could be to earn $12,000 in year one. The second step could be to earn $48,000, and so on.

You want to set incremental goals because once you acheive them you’ve proven to yourself (and any naysayers) that you can actually do this. Once you’ve achieved a small goal the next goal doesn’t seem that far off. You keep building on the steps until you reach the overall goal.

{ 2 comments }

Golfing Girl January 3, 2011 at 8:21 pm

You are right about the attainable–my initial 2010 goal was to fully fund both of our Roth’s this year (despite me being at home without an income for the first time). We put in $2500 each, earlier this year and we have until this spring to put in another $2500 each to max them out, but it’s pretty unrealistic for us right now.

Hubby’s stock options mature in February, and will likely be in the $4000 range, but I don’t think we want to throw it all in the Roths (we were hoping to sock some away for a little vacation). So I think a good ATTAINABLE compromise will be put any surplus over the 6 month emergency fund (currently at -$100 due to Christmas) into the Roth (at best I hope for a few hundred dollars surplus by April) and put HALF of the stock option money we’ll get in February into it. We may not max it out, but we’ll make a dent.

Golfing Girl January 3, 2011 at 8:26 pm

P.S. To clarify, our 6 month emergency fund does not equal negative $100, rather we dipped into for Christmas and need to put back $100 to get it back to our full 6 month amount. 🙂 I don’t think I’d want to fund Roths and a vacation without any savings. 😉

Comments on this entry are closed.