As the end of another year approaches, bathroom scales become surrounded by additional gravitational fields and tumbleweeds gently blow across empty checking accounts.
With all the holiday socializing, travel and gifts, it’s no surprise.
According to a Gallup study on holiday spending, American’s are likely to spend $922 per adult person on Christmas in 2019. This marks a continued increase in spending year-over-year since 2008.
This startling statistic acts as a good reminder of just how important it is to take a step back from the consumerism draw and take a long look at our personal finances.
Can your checking account really handle all this spending? How about your long term savings goals?
Tipping scales and barren bank accounts are strong reminders to clean up our financial acts for the New Year. While I don’t care to speak to diet and exercise goals (still the top New Year’s Resolutions for 2020), I can provide some helpful financial resolutions to focus on this year.
Here are 29 personal finance goals to set in the New Year so you can clear out the dust bunnies in your savings account and save more money this year.
Contents and Quick Links
- 1 What is a short term goal?
- 2 What is the most important financial goal that must be set first?
- 3 What is a smart financial goal?
- 4 #1: Review your year in finances
- 5 #2: Establish a method to track your spending
- 6 #3: Track spending for one month
- 7 #4: Make your lunches at home for one month
- 8 #5: Meal prep for one month
- 9 #6: Take a no-spend challenge for one month
- 10 #7: Create a will
- 11 #8: Create an ICE binder
- 12 #9: Review your investment accounts and rebalance
- 13 #10: Read The Simple Path to Wealth
- 14 #12: Set up or review your life insurance policy
- 15 #12: Open a traditional or ROTH IRA
- 16 #13: Payoff your smallest debt
- 17 #14: Vow to never use your credit card if you can’t afford to pay it in full every month
- 18 #15: Automate a small amount of savings every month
- 19 #16: Review your spending and find one area that can be improved
- 20 #17: Follow a budget for one month
- 21 #18: Use a goal planner for one month
- 22 #19: Download Habitbull and use it for one month
- 23 #20: Spend $100 less on groceries this month compared to last month
- 24 #21: Make dinner at home 6 nights/week for one month
- 25 #22: Calculate your net worth
- 26 #23: Calculate your savings rate
- 27 #24: Calculate your retirement date based on how much you have saved now
- 28 #25: Invest in yourself with financial education
- 29 #26: Invest in yourself with career education
- 30 Smart annual financial goals to aim for in 2020
- 31 #27: Save 25% of your income
- 32 #28: Max out your retirement contributions
- 33 #29: Buy a rental property
- 34 And that concludes the list of 29 short term financial goals to set
What is a short term goal?
First of all, what makes for a short-term goal and how are they different from long-term goals? Well, short term goals just don’t take as much time. They are easier wins that can keep you motivated to continue working towards a bigger, loftier, long-term goal.
Short-term goals can be completed within a year, but ideally within 90 days. They can either stand alone, meaning that once you accomplish it, you are done. Or, they can be a smaller step that helps you on the path to achieve much bigger goal.
As an example, if you want to lose 100 pounds, it’s not going to happen over the next 90 days. But it can be broken down into smaller, short-term goals. If the idea seems daunting, understandably so, the first step can be as small as incorporating a healthy meal for dinner every weeknight for one week.
Once that short-term goal is achieved, another one can be set. There will be many, many short-term goals, anywhere from one week to 90 days, all working towards the bigger long-term goal of losing 100 pounds.
Similarly, big long-term financial goals need to be broken down into more achievable, bite-sized, short-term goals that you can focus on, and actually achieve, within the next 90 days.
What is the most important financial goal that must be set first?
Since short-term personal financial goals often stem from a much larger goal, it can be confusing or difficult to pick out which goal is most important and should be set first.
The answer to this question is just like personal finance, it’s personal. It depends on your own unique situation and long-term goals.
Regardless of where you are now or where you want to go, the most important goals to start out with include:
- Track spending and understand where your money goes every month
- Create (and follow) a budget
- Pay off high interest debt
- Automate savings
- Create (can follow) a personal or family financial plan
What is a smart financial goal?
This article provides a long list of smart financial goal examples that you can use throughout the year. It’s important to highlight the SMART.
Smart goals are:
Every short term financial goal on this list is clear, can be measured so you know if you are making progress, is highly achievable and realistic, and can be completed within the year. Most of them can actually be completed within a few days or a month. Some are even quick wins that you can sit down and knock out right now.
Use this list as examples and tailor them to your unique needs and goals.
#1: Review your year in finances
Stay organized in 2020 by conducting a thorough review of your personal finances. Uncover just how your year went, how much progress you made and what you need to do differently in the New Year.
#2: Establish a method to track your spending
There are many ways to do this, the important thing is to pick a method and try it out. If you find that you have trouble sticking with it, try a different method. Play around until you find something that works for you.
After all, personal finances is just that, personal. What works for me won’t necessarily be the best fit for you.
#3: Track spending for one month
If you have method of tracking your spending but just can’t seem to stick with it, make it your goal to track for an entire month.
You will lean a lot about your overall spending habits, uncover areas of overspending, and learn exactly how you can make adjustments so you can save more.
If you have a big financial goal you want to achieve, you need to track your spending! You have no idea where you are actually going if you don’t know where you are right now. And where you are is reflected in where your money goes.
#4: Make your lunches at home for one month
A big area of overspending for me used to be eating out while I was at work. It just seemed like such a hassle to make my lunch ahead of time, and I became so bored with the standard options I had in the refrigerator.
But with a little extra time and planning, you can save significantly over the course of the year with the simple act of bringing your own food to work. Bonus, your health with thank you as well.
#5: Meal prep for one month
I’ll admit, this is hard one for me and will be going on my personal list of financial goals to set for the New Year.
I hate planning my meals ahead of time! I don’t know what I will “feel” like eating on any given day of the week. But the fact is, even though I’m saving up to 25% on my groceries now, I’m still over budget because I don’t do a good job planning ahead. Now that we are a family of 5, this is becoming increasingly necessary.
The key here is to try it for one month. This isn’t a yearly commitment. Anything is doable for the sort period of just one month. You may just find that the savings will be worth it, not to mention the time savings and convenience.
If you are new to meal planning and have no idea how to start, give $5 Meal Plans a try. You’ll receive customized meal plans, recipes and shopping lists right to your inbox, which removes all the time and guess work.
#6: Take a no-spend challenge for one month
If you find yourself tempted to overspend month after month, a no-spend challenge justy might be your ticket to improved finances. Again, this isn’t a long term goal, anything is doable for just one month.
You will learn a whole lot about your spending tendencies when you have to stop and think before pulling out your credit card. Especially if you aren’t in the habit of tracking your finances, you may have no idea just how often you spend unnecessarily.
#7: Create a will
I know this seems like an overwhelming task that you just want to put off indefinitely. Or, you don’t feel you have enough assets to bother with this chore. But this is such an important task that can’t be put off anymore.
My husband died suddenly and hadn’t gotten around to finalizing his life insurance policy or creating a will. It was a disaster that left me and our son in what felt like a hopeless financial situation.
Thankfully, the process isn’t nearly as complicated or expensive as you’d think. There are many online companies that provide templates to make it quick and easy. Trust & Will is the company I used. It only took me about 10 minutes to create a legally binding will that I can trust to be accurate and include all the details needed.
Give the gift of peace of mind for the family you could someday leave behind by establishing a clear plan and instructions so they don’t have to worry or wonder what is best.
#8: Create an ICE binder
If the goal of creating a will made you realize just how unprepared you are for an emergency or unexpected death in the family, consider putting together an “In Case of Emergency” or ICE binder.
The purpose of an ICE binder is to keep all important financial, household, and health information in one place. Information like online account passwords, banking and insurance details and even baby/pet/house sitter instructions, all organized and accessible.
You can read about how to create your own binder at Why You Need a Family Emergency Binder. However, I highly recommend you download a pdf file including all the info you need to gather and fill in. For less than a meal out you can know exactly what details to include and get started right away.
I can speak directly to how much I wish my husband and I had been better prepared. How much less stressful and emotionally traumatizing it would have been if I’d had an organized collection of emergency information. When my husband died, I had no idea what to do. I didn’t know the accounts, how to access them with online passwords, or even what his burial preferences were.
#9: Review your investment accounts and rebalance
This financial goal that will help you build wealth over the years to come and is actually quicker and easier than you’d think.
Employer sponsored retirement accounts in particular seem more daunting than they need to be. You may remember filling out the forms during new-hire orientation, checking the box that vaguely implies that you want to plan to retire around the age of 65, then the box that dictates what level of risk you’re willing to take. You pick a percentage of each paycheck you’d like to contribute, then your employer takes care of the rest.
This process is mixed in with all the other new-hire information you need to know, and becomes a “set it and forget it” situation. But since money is getting deposited directly from each paycheck and the account is growing, it must all be fine and “enough”.
But do you know what you are investing in? Do you know what your management fees are? Do you know if you are on target to retire when you plan to?
How do you even go about answering these questions?
First, take a look at 11 Quick & Easy Steps to Maximize Your Retirement Savings. This will step you through the process of reviewing your account and ensuring you are maximizing your savings.
If you don’t have an employer sponsored retirement account, you can learn about the other types of investment accounts here, and find the one that best meets your needs.
Second, review exactly how you are invested. Is it a target fund? These funds are a blend of stocks and bonds with percentages that reflect how conservative or aggresive you should be depending on when you want to retire. The sooner you need to retire, the more agressive the investment choices.
Find out what you have and what the management fee is. If it is less than 0.05%, you’re doing pretty good and not forking too much of your money over to fees. If you are around 0.1-1%, you should look into other options. Total market index funds for both stocks and bonds are my favorite, with expense ratios near zero for both Vanguard and Fidelity. Simply pick the percentage of stocks to bonds that you are comfortable with.
If you want to continue working for years to come, you can go as aggressive as 100% total stock market index fund. Or, If you want to be more conservative and balance out the natural ups and downs of the market, add more bonds to the mix.
Step #4: Education
And if this already sounds too confusing, move on to financial goal #10.
#10: Read The Simple Path to Wealth
If you want to build wealth and understand how to do this, add this book to the top of your reading list.
Unlike any other investment book out there, this one is a simple read that takes all the confusion of investing and simplifies it so that you can finally understand what in the world is going on.
After reading this book, you won’t feel intimidated anymore. You will be ready to take control of your investments and know that you are on the path to securing your retirement future.The Simple Path to Wealth: Your road map to financial independence and a rich, free life
#12: Set up or review your life insurance policy
This one goes hand-in-hand with creating a will and organizing an ICE binder. Yet another thing that would have changed the course of my life after my husband died. He had no life insurance policy. Since I was a stay-at-home mom, with no career and no income, you can imagine just how devastating this was.
If the thought of figuring out what type of policy is best for you and your family, and how much you need, visit The Beginner’s Guide to Understanding the Different Types of Life Insurance Policies.
#12: Open a traditional or ROTH IRA
Employer sponsored retirement accounts, typically 401(k) or 403(b), allow you to invest money that hasn’t been taxed yet. Your employer may also contribute funds which don’t count towards the maximum allowable contribution.
But your 4019(k) isn’t the only type of retirement account available, and it may not be the best option for you.
The benefits of starting a traditional IRA include:
- Pretax contribution
- Earnings grow tax free
- You control which investment company to use and therefore the investment options and fees
- Contributing will lower your adjusted gross income, which is important if you are close to the next tax bracket
The benefits of starting a ROTH IRA include:
- No immediate tax benefit but earnings grow tax free and withdrawals after age 59 1/2 are tax free
- Tax/penalty free withdrawals at any time on contributions (not earnings)
- You can withdraw contributions from traditional IRA tax/penalty free after 5 years (ROTH conversion ladder)
- You can withdraw for first time home purchase or college expenses for you or your children
- No RMD’s (required minimum distribution) at age 70 1/2
Since money invested in a ROTH IRA is aftertax, it makes sense to invest if you are in a lower income bracket and pay little to no tax on earned income. If you are a in higher income bracket, it makes sense to invest pretax in a traditional IRA, where the tax savings can grow over the years.
#13: Payoff your smallest debt
If you feel overwhelmed by debt and aren’t sure how to make a dent, let alone real progress, start with just one debt.
While I recommend paying off debt with the largest interest rate first, if that is one of your largest debts, it can feel so daunting that you don’t make any progress. When this is the case, just take your smallest debt and make every effort to pay it off.
Once one debt is down, you’ll have more money to apply to the next debt. Soon enough, you’ll be making progress.
#14: Vow to never use your credit card if you can’t afford to pay it in full every month
If you commonly carry a balance on your credit card(s), meaning you are charged interest every month, it’s time to put those cards away.
Make the commitment, even if just for one month to start out, to never purchase something on credit until all cards are paid in full and you can afford to continue paying the balance every single month.
Start by keeping your credit cards at home and only using a debit card. After one or two overdraft charges, you won’t be likely to use a card without checking your account balance and weighing the importance of the purchase.
#15: Automate a small amount of savings every month
One of the very best tactics to save more money is to automate the process. There are a few ways to do this.
- Set up an recurring transaction to transfer of a defined sum of money from your checking account to a savings account once or twice a month.
- Use an app that will do this for you.
Acorns is a great app that will automatically round up your purchases and place the spare change in an investment account. For just $1/month you end up saving extra money every month and then that savings is automatically set to grow over the long term into even more savings. This is a handy option if you want your savings and investing to run on autopilot for you.
Acorns also offers more advanced savings options, including retirement savings and a spending account that covers everything from checking, savings and investing.VIP: Get $10 when you sign up for Acorns
#16: Review your spending and find one area that can be improved
This short term financial goal follows goal #1 from above; track your spending for one month. Once you achieve that goal, a great next step is to review your spending and uncover one area that could use some improvement.
For me, I uncovered a whole lot of unnecessary spending in my personal care expense category. I tracked my spending for just one month and found all kinds of spending that I could easily substitute, lower or even eliminate. Which amounted to over $700 of savings per month.
If you uncover just one area to lower your spending, your savings account (and your net worth) will feel the difference.
#17: Follow a budget for one month
If the thought of following a budget is overwhelming, start with the goal of testing it out for just one month. This way, you can get a feel for it, practice and play with it, then decide to continue or not. While I highly recommend keeping with it, it may take setting this goal month to month rather than expecting yourself to do it all and commit to it long term.
There are so many ways to budget. And yet again, I can’t tell you which method will ultimately be right for you. This is entirely personal. But here are some options to try out:
Explore options provided by your bank
For example, I use USAA for my checking accounts and short-term savings accounts. They offer an app for my smart phone that tracks all my spending accross every account that I have, including other banks, investment accounts, loans and credit cards, and does my budgeting for me.
All I have to do is review my banking transactions and ensure that the correct spending category was assigned, thus ensuring it goes to the correct budget category. This effectively tracks my entire household budget, complete with month-to-month tracking and comparisons and alert text messages or emails when I’m close to the top of my budgeted spending.
While this is quite easy and right at my fingertips since it’s on my phone, it isn’t the method I typically rely on.
Mint is a fantastic, and free, resource for everything described above, but even better. It’s easier to establish rules for recurring transactions so that the proper spending category is automatically assigned. It also tracks your overall net worth, FICO score, investments and savings goals.
All-in-all, it’s quick to set up and easy to refer back to throughout the month. Which is what allows you to keep track of how you’re doing and whether you are on budget or not.
Create your own app
If you want a more hands on approach that doesn’t involve handing over personal account information, you can create your own app to track your spending and update your budget. As you enter in expenses, they are fed into a spreadsheet, which you can then use to highlight specific budget information.
I use this to track joint spending and budgeting as it’s the easiest way to include the spending of multiple family members. At this time, my bank and mint can’t track accounts that aren’t mine.
Visit How to Make Your Own Free Daily Expenses App to learn how to set this up on your smart phone and share it with other members of your family.
#18: Use a goal planner for one month
If your life feels chaotic and you battle with keeping track of everything on your plate, a planner can do wonders to regain focus and organization. Similarly, if you struggle with achieving goals and staying motivated, a goal planner can help you track progress and keep important goal tasks front and center.
#19: Download Habitbull and use it for one month
One of the most important components to goal setting is tracking your consistency and building the habits necessary to complete your financial goal. Habitbull is a great tool (which I love and use every day) to uncover the habits which will help you and then stay motivated to work on those habits every day.
For example, if you want to save $1,000 in 3 months, you can set the daily habits of:
- Make dinner at home (5 nights/week)
- Bring lunch to work (5 days/week)
- Take public transportation or bike/walk instead of drive
- Transfer a few dollars from checking to savings account (3-5 days/week)
- Complete a no-spend day (2-3 days/week)
If you want to track your spending you can set the daily habits of:
- Log daily expenses (daily)
- Adjust assigned expense categories for each expense (daily or weekly)
- Check your budget (weekly)
You can set multiple habits, adjust how often you want to complete each one, set reminders and track your consistency. It’s a great way to remain aware of what is most important and make the time to form the habits which will lead to success.
#20: Spend $100 less on groceries this month compared to last month
The majority of all spending comes from just 4 major expense categories. Cutting spending from these areas will have the biggest impact on your ability to save more money.
Groceries and eating out is one of the biggest expenses, therefore cutting back on food can result in huge savings every month.
Start by tracking your spending and calculating exactly how much you spent on groceries. Set the goal of lowering your grocery spending by $100 for the next month. Once you do that, you can continue setting goals to bring overall spending down from groceries and dining.
For tips on how to save money on groceries, see 11 Tips to Save Money on Groceries.
#21: Make dinner at home 6 nights/week for one month
It’s amazing just how much money this can save you every month. If you are in the habit of eating out often, including running through the drive thru after a long busy day. Not only is this hard on the checking account, it’s rarely as healthy as a home cooked meal.
Start small because this isn’t an easy transition to make. When you are accustomed to yummy food served up without the hassle of shopping, prepping, cooking and cleaning, it’s hard to suddenly give that up. And you don’t have to give it up. Allow for 1-2 meals out every week and commit to cooking all other meals at home for one full month.
A very useful resource to get started is $5 meal plan. Receive customized meal plans and shopping lists right to your inbox each week so you can easily map out what to make for the week and get your shopping done in one trip. Meals average just $2 per person which shaves a significant amount of money off the food budget.
#22: Calculate your net worth
Calculating your net worth is a goal that you can achieve in just a few minutes of time, more if you have to dig through accounts, find lost passwords and brainstorm forgotten assets. Even if this easy-win financial goal takes a full day to muddle through, it is so very worth every minute of time spent.
Knowing your net worth uncovers exactly where you are financially. Setting long-term financial goals often center around your net worth.
If you have debt, you likely have a negative net worth, so your goal is to payoff that debt and track your net worth as it inches closer and closer to zero, and finally tips into the positive.
If you want to save for financial independence, and have a calculated FI number of $1.5 million, you need to know what your current net worth is now so you know how much more you need to save. Your net worth is how you will track your progress and understand where you are now and where you need to go.
It’s also a huge motivator to continue making progress. Small changes are immediately reflected in your net worth number. There’s nothing much more exciting than watching that number climb.
#23: Calculate your savings rate
Understanding your savings rate is another important tool to have if you want to save more money, save for retirement or achieve financial security and independence.
Your savings rate tells you exactly how much you are currently saving as a percentage of your total income. So if you make $100,000/year and save $10,000, you have a savings rate of 10%.
The average US savings rate for 2018 was 8.8%. But what does this mean?
With a savings rate of 8.8%, regardless of income, it will take 54 years to retire. However, the clock doesn’t start until you start saving. So if you start saving at the age of 30, you won’t be ready to retire until the age of 84.
This is why understanding your savings rate, and pushing it as high as possible, is so essential to your personal financial health and future.
#24: Calculate your retirement date based on how much you have saved now
Do you know if you are on track to retire when you want to?
This is an important question, and one that you should answer as soon as possible. The more time you have to save for retirement, the better, the less aggressively you need to save now.
Your investment company likely has tools and calculators to predict your target retirement date based on current savings and savings rate and any projected increases in savings rate. This is the easiest place to start.
You can also calculate your projected retirement date based on your current savings rate and savings by visiting the Networthify Early Retirement Calculator.
#25: Invest in yourself with financial education
The first step to improving your personal finances is to learn more about money management. Here are some resources to get started:
Stepping Stones to FI – this blog is a great place to start!
My favorite personal finance books
#26: Invest in yourself with career education
Your savings rate is defined by:
To save more money you can either decrease your expenses or increase your income.
When it comes to cutting expenses, there’s only so far you can go. Eventually you reach a point where you’ve optimized spending and just aren’t willing to make any additional lifestyle adjustments in the name of frugality. This is when it’s time to focus on increasing income.
On option to increase income is to invest in additional education which will allow you to progress within your current field and company, or even switch to a higher paying career.
If you aren’t sure what your options are it can be helpful to reach out to a job recruiter who would know what current jobs are available in your area and what training is valuable to have.
Smart annual financial goals to aim for in 2020
The last three smart financial goal examples are more advanced and take time to complete. While not exactly long term goals, they could take the whole year to achieve.
However, these last financial goals are incredibly powerful wealth builders. Achieve these and you are on your way to not just financial security, but financial independence.
#27: Save 25% of your income
Take smart financial goal # 23 a step further and reach for a 25% savings rate. Even if you only maintain it for a month, you will learn just what it takes and become creative at finding new ways to spend less and save more money.
#28: Max out your retirement contributions
The maximum retirement contribution you can make to an employer sponsored 401(k) or 403(b) for 2020 is $19,500 with an additional $6,500 catch up contribution if you are over the age of 50.
Keep in mind that this limits the amount that you contribute and doesn’t include employer contributions. If your employer offers 4% matching, that’s additional money that can be invested for the year.
Why would you want to contribute this much to your retirement account?
If you start with $0 invested, max out your contribution every year and your employer contributes an additional $4,000, you would be contributing $23,500 each year.
After 10 just years (assuming 7% interest rate) you would have $347,415, $22,728 of that is from interest earned on your investment over the years.
Even better, once compounding interest really kicks in, your savings will rapidly increase year over year.
After 20 years your total will be $1,030,832. Enough to retire if you have fairly low monthly expenses. Better yet, $560,832 is from interest earnings alone. This means that you only have to contribute 45.6% of your income to your retirement fund. After just 20 years, the remaining 54.4% of your fund is from compounding interest.
The sooner you can start, and the more you can contribute, the sooner you can achieve financial independence and retire when you choose to.
#29: Buy a rental property
My favorite method of wealth building is real estate investing. This is by far the quickest way to generate passive income and generate wealth at the same time. With leverage you can invest little, or even no money, and still end up with an income earning, appreciating asset. One that tenants pay for you.
Learn more at:
- Real Estate Investing: 6 Pivotal Reasons to Get Started Today
- How I Purchased my First Rental Property
- And more REI articles within the Wealth Building Category Page
And that concludes the list of 29 short term financial goals to set
I hope this list provides ideas of the different types of financial goals you can focus on over the next year. Whether you start out strong in January or finally get focused on your finances midway through the year, these goals will set the path for a healthy and secure financial future.