Did you have goals for 2020? Were you able to achieve them?
Most years, I set goals for the new year in late December or January. Although I am a proponent of setting goals when you want to change something and working towards it, there is something about the beginning of a new year to help motivate and clearly distinguish between old and new.
Past goals included writing one letter of appreciation each month to someone who impacted my life, a photo a day on Instagram, and hike at least once per month.
Although I have many financial goals, I have never made a New Year’s financial goal – until this year. This will be the first year I set a New Year’s financial goal. I’ll share more about what the goal is and how I plan to achieve it down below.
In this post, we will explore how to set goals, how to track your progress, and ways to keep you accountable.
I am a big believer in living intentionally, which means having goals and working towards them. If you do not like the word goals, call them something else: achievements, improvements, or changes.
If you are ready to learn how to set goals for 2021, continue reading.
How to Create a Goal
What do you really want to achieve?
I am not talking about some random thing you want to change. What is that thing that gnaws at you? That’s the goal you should be making.
If you only have a mild interest in changing something, often backed up by the phrase, “I wish I could change that”, and nothing more, then that is not your goal.
Think about the different areas of your life where you could change something. It could be your
- Personal Development
Which areas do you want to change?
You need the motivation to achieve your goal. Get excited. Go after it. Be passionate about your goal.
How will that goal change your life?
Once you have your vision in mind, set a SMART goal. You may have heard of SMART goals. It stands for:
- Time Bound
Your goal needs to be clear, which means defining it. What do you want to accomplish? What do you need to accomplish it? Where are you doing it? Who else is involved? What obstacles do you anticipate?
Most importantly, why do you want to achieve the goal? What is driving you? What do you get out of it?
Instead of “I want to save more money in 2021”, you could set it as “I want to save $5,000 in 2021 from my paycheck by reducing my monthly expenses in order to save for a trip to Italy, which is a dream of mine. I will need the support of my significant other.”
Now, you have a way to measure your progress, and you have specified who is helping, when you hope to reach it, and your “why.” There is no confusion at the end of the year. You either made it or you did not.
Have you tried baking without measuring? I have. It does not turn out well.
You cannot say you want to create a delicious cake and throw a bunch of ingredients together.
There is a reason I stick with cooking. A little bit of this and a little bit of that can produce a delicious meal. You cannot do the same with baking.
Think of setting goals as baking. You need to make your goal measurable if you want any hope of creating something wonderful. You take each step one at a time.
In the example above, you have an annual goal you can measure, but you should break it down by different time periods. You could set quarterly goals, monthly goals, and even biweekly goals.
For example, $5,000 annually broken down would be:
- Quarterly: $1,250
- Monthly: $416.67
- Biweekly: $192.31
Now, you know how much you need to save from each paycheck and can measure your progress throughout the year.
We would all like to be multimillionaires within a year, but that is not attainable for most people. If you set that goal, you are setting yourself up for failure.
I used the goal of $5,000 above. If you are in school and earning $500 a month, $5,000 is not an attainable goal. If you are a CEO making $1,000,000 a year, $5,000 may be too attainable of a goal.
You want to push yourself and stretch towards your goal. There is a reason the quote exists, “Shoot for the moon. Even if you miss, you’ll land among the stars.” by Norman Vincente Peal.
I find the best goals make people slightly uncomfortable. These are the goals where they have their doubts, but friends normally believe they can reach them.
Is now the right time to go for your goal? In the previous example, perhaps your company recently downsized, everyone had their pay cut, you are expecting your first child, and your significant other is planning to take time off work for the first year.
Saving $5,000 for a trip to Italy during that time may not be appropriate. Perhaps setting that particular goal in a couple of years would be more relevant.
Imagine playing football without a time clock or delivering a work project without a deadline. It probably will not work well. It is the same for goals.
You need to set specific dates to track your progress. You can break it down using any time period you want. It could be days, weeks, months, quarters, years, decades, or longer.
Continuing the previous example goal, once you have your biweekly savings amount, you know how much you should have saved by your 10th paycheck. It is $1,923.10. If you do not have it saved, you need to adjust your savings for the rest of the year to reach $5,000 by December 31.
Once you have your SMART goal, write it down. Post it where you will see it regularly. Being reminded of your goal and why you are doing it will help provide motivation and accountability.
How to Track Your Progress
Regardless of your goal, you should track your progress. There is a fine line between tracking too frequently and never doing it.
If you track on a daily basis, you may be discouraged on the days you don’t make progress. If you only check once after six months, you may fall far behind.
At first, I like checking in weekly on my goals to establish a routine and build momentum. Habits are tough to change, which is why frequent reminders are important.
After a few weeks of tracking your progress on a weekly basis, you may want to try twice a month or even once a month. Experiment with the frequency until you find something that works for you.
For example, I want to reduce my spending next year; however, instead of saying I want to reduce my overall spending, I picked two categories where I would like to reduce my spending.
I want to limit my Amazon spending to no more than $2,000 next year. During the pandemic and given that I moved into a larger townhome, my spending has been higher. It’s too easy to click buy and have something arrive the next day. I also want to limit my Costco spending to no more than $3,500 next year. I love food, but I have splurged, particularly during the pandemic since we are spending more time at home.
If I break down the goal, this works out to no more than about $167 in spending on Amazon and $292 on Costco per month.
I plan on checking in on this goal monthly, but also realize every three months will be helpful. For example, some months I go to Costco more than once and then don’t go for a longer period of time. If I checked after one month, I may have spent more than $292, but that is okay if I know I am not going next month.
I also plan to do a six-month check-in to establish whether I need to change anything for the second part of the year.
Since I have all transactions downloaded to Mint, this is easy for me to track because I can sort spending “By Merchant” for any time period. I have calendar reminders to check my progress on the last Saturday of every month.
Whichever way you decide to track your progress, make it easy on your future self. Pick the day of the week and time of day where you know you are most likely to accomplish it. Also, set up a system where no work is required when you check it. It should be as easy as opening a program, journal, or another tracking system to know if you achieved it. It should take five minutes or less.
In my case, I can do it in under two minutes.
Once I know if I am off track, it is easy to calculate what adjustments need to be made to my spending for the rest of the year.
While you can make tracking your goal complicated, find a system that is as simple as possible to follow.
How to Stay Accountable
Peer pressure is a phenomenal motivator.
Tell a significant other, friend, colleague, or family member about your goal. If you are part of an online community, post it. Make it public.
Nobody wants to disappoint themselves or tell someone they failed to achieve something. Even better, exchange goals with someone and check in with them frequently. Having someone you can talk with about your goal, how you are feeling about it, your progress, mess ups, and accomplishments will help.
In my case, I told my partner, Molly, about my spending goals. She does a great job keeping me on track. We often go to Costco together and if we appear to be going over budget, she is not afraid to ask if we really need to buy something. She is also very frugal, which means her role as an accountability partner is a perfect fit.
Another successful method to keep yourself accountable is to gamify your goal. Gamify means to turn an activity into a game. You use rewards when tasks are accomplished, which leads to a desire to complete more tasks.
For example, I like running and the Nike application on my phone makes it into a game. There are different badges, such as if you run every month for a certain length of time, as well as achievements showing my longest run, faster 5k, and other runs. At the end of some runs, a Nike instructor says a 30-second motivational clip. The application even tracks total miles run and gives me a corresponding color badge.
These elements encourage me to run, making it into a game where I am rewarded and motivated by earning new badges and achievements.
If you can find a way to do it with your goal, do it. I could design a system where each month I am on track, I earn a badge. After a certain number of badges, I could reward myself with something, such as a Costco sundae.
Gamification is a great way to help keep you accountable.
Debt paydown is a common goal and one where staying accountable is difficult. If your goal is to pay down debt in 2021, consider two different methods of debt paydown: snowball and avalanche.
The snowball method is where you pay the smallest debts first and pay your largest debts last, regardless of the interest rate. This method focuses on building motivation. By paying off the smallest debts first, you get early wins, which becomes more motivation to save more and pay off the larger debts more quickly.
Frankly, I was never a fan of this method because it could mean paying down small debts with low interest rates and paying more interest on larger debts with higher interest rates. Mathematically, it makes less sense; however, I also realize we are emotional beings and sometimes the math does not matter. Sometimes, establishing the right behavior is more important and can achieve far better results.
The avalanche method focuses on the highest interest rates debts first and then working towards the lowest interest rate debts. For example, consider the following loans:
- Loan A with a balance of $10,000 and a 5% interest rate
- Loan B with a balance of $1,000 and a 1% interest rate
With the avalanche method, you would pay the minimum amount on Loan B and apply extra payments towards Loan A. The downside of this method is it can feel like little progress is being made on larger loans.
With the snowball method, you would pay the minimum amount on Loan A and apply extra payments towards Loan B. Although Loan B has the lower interest rate and it may cost you more to pay less on Loan A, the goal is to wipe out the smaller debt first.
Again, the avalanche method may help you save more money by reducing your interest payment. The snowball method will help minimize the number of loans and potentially build motivation to pay down your debts sooner.
Although you can achieve goals alone, inviting others to be a part of your journey can help hold you accountable. The easiest way is to find someone who also has a goal and checking in with each other frequently. If you respond to rewards better, consider gamification to help keep you accountable.
Summary – Final Thoughts
The end of the year is a great time for goal setting. Although I am a proponent of goal setting any time you want to change anything, there is a clear distinction from one year to the next between December and January.
As you think about your goals for 2021, remember to make them SMART goals – specific, measurable, attainable, relevant, and time-bound. Write down your goals in a place you will see them daily.
Once you have your goals, create a system to track your progress and make it as foolproof as possible. I always try to make things as easy as possible on my future self, which is why my systems run as automatically as possible. If you do not know where you stand in under five minutes, revise your tracking system.
Lastly, find an accountability partner. Your accountability partner can be a friend, family member, or other person in your life. It is an even better fit if that person also has a goal for 2021. You can motivate each other.
What are your goals for 2021?
Please comment down below. We can all be accountability partners.