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Setting long-term personal finance goals can help you make more meaningful progress toward what you want to achieve. But if you're not careful, it can be easy to let things slide and lose motivation.
Breaking down annual goals is one way to help you maintain motivation and keep better track of your progress. One way to do this is to set quarterly goals. Here are three steps you can take to narrow down which goals you want to focus on and make sure you achieve them.
1. Decide What Financial Goals You Want to Accomplish This Year
Before you set quarterly goals, think about what you want to accomplish in terms of the full year. Then, you can break down those goals into short-term chunks that can seem more attainable. It can also make quarterly planning easier because you've already created the framework for what you want to achieve.
As you think about your most important financial goals over the next year, here are some potential ideas to consider:
- Pay off debt. If you have high-interest debt―whether it's credit cards or another form of debt―think about how much you can reasonably pay off in the coming year. You may also consider paying off lower-interest debts if being debt-free is a priority for you, but weigh that with other important goals, including the ones below.
- Save for retirement. According to Fidelity Investments, you should aim to save 15% of your pretax income for retirement. If you have a 401(k) or similar employer-sponsored retirement plan and your employer provides a contribution match, take advantage of that to increase your savings rate. You can also take advantage of individual retirement accounts (IRAs) and self-employment retirement plans if you're self-employed or an independent contractor.
- Contribute to an emergency fund. Money experts recommend keeping three to six months' worth of expenses in your emergency fund. That can take years to achieve, so think about how much you can save over the course of the next year to build it up.
- Create a budget. If you haven't already created a budget, make it a goal to start that this year. It might seem like it shouldn't take that long, but it can take several months to figure out which budgeting style works best for you and evaluate how you're doing and whether you need to make adjustments.
- Improve your credit. Improving your credit history can make it easier to qualify for financing when you need it, not to mention at lower interest rates. It can also save you money on auto and homeowners insurance and make it easier to get an apartment and even certain jobs. If your credit score isn't where you want it to be, setting goals to build it this year can be a top priority.
- Consider other goals. Depending on where you are financially, there may be other goals that are important to you. That can include things like saving for a home down payment, contributing to a health savings account (HSA), setting up your child's education fund, investing in non-retirement accounts and more.
With all of these goals, there's no right or wrong way to approach your finances. The important thing is to think carefully about your situation and where you want to be, then start taking steps to get there.
2. Set Deadlines for Meeting Your Goals
Once you have all of your goals down on paper, it's important to be specific about what you want to accomplish. Here are just a few examples:
- For retirement, decide how much of your income you want to save each month.
- To pay down high-interest debt, determine how many accounts you want to pay off or how much total debt you want to eliminate.
- If you're building your emergency fund, think about how much money you want to have at the end of the year.
Go through this same process with each goal to make sure they're specific and attainable. Then, break them down into smaller chunks by setting deadlines by which you want to reach certain milestones.
For example, say you want to start an emergency fund and have $6,000 in it by the end of the year. You'd then set deadlines to add $1,500 to your savings account by the end of each quarter. You could even break that down into smaller chunks by setting a monthly deadline to add $500 to the account.
As you create deadlines for different financial goals, consider using a calendar or notes app to help you keep track of each goal and when your deadlines are. Even then, though, think about how many deadlines you have to keep track of and determine your comfort level. If you have too many, it can be easy to get overwhelmed.
As with every step of this process, it's important to create goals and habits that you'll stick to.
3. Hold Yourself Accountable
While setting your quarterly personal finance goals is important, it's only part of the process. It's also critical to keep track of your progress and hold yourself accountable to meet your deadlines.
This may require that you share your goals and deadlines with someone else who can act as an accountability partner, or join a financial accountability group. It can also include creating rewards for meeting your goals. For example, you may decide to treat yourself to a special meal if you meet all of your quarterly goals.
Alternatively, you can try negative reinforcement, such as no takeout for a month if you overspent in the previous month.
Because everyone approaches self-evaluation and accountability differently, it's important to come up with a system that works best for you.
Use Apps, Tools and Other Resources to Make the Process Easier
Setting financial goals is important because it can help you stay focused on what matters to you and what you need to do to achieve the life you want to live. As you work on your financial goals, take advantage of the tools and resources available to you.
For example, you can download a budgeting app to help you keep track of your spending and savings goals. You can also open an account with a bank that offers multiple savings accounts, so you can create a separate account for each of your goals.
You can also use Experian's free credit monitoring service to help you keep track as you pay down debt and improve your credit, as well as to stay on top of your credit report and to address potential issues as they arise.
There are many different resources and tools you can use to make the most of your money management and to reach your goals. The key is finding a system that will motivate you to stay on track. Breaking annual goals down into quarterly chunks may be the strategy you need to reach your destination.