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If you read my blog often, you know that my finances have been a top priority for me for the past couple of years.
Before I started this journey, I knew almost nothing about money management. Needless to say, there was a huge learning curve.
A huge part of this journey has been setting financial goals to create some direction for me. This has been such a game-changer in helping me to take control of my financial life and actually feel ahead instead of just always falling behind!
Luckily Brandon has been great about jumping on board and setting financial goals with me too.
In this post, I’m sharing why you should set financial goals and how to set them, and I’m giving you a list of some great financial goals you can set for 2020!
The Best Financial Goals to Set in 2020
Why you should set financial goals
There’s a big difference between wanting to do something and actually doing something. And the difference is almost always setting actionable goals.
For many years, I would have told you that paying off debt was a top priority for me. And yet, Brandon and I were making the minimum payment every month on our six figures of debt.
So yeah, we said it was a priority for us. But our actions proved that was not really the case.
Setting goals is what allows you to stop just dreaming about getting your finances in order and actually start doing it.
Setting long and short-term financial goals is an absolute game-changer in taking control of your financial life and actually living a life you’re excited about.
How to set financial goals
Ok, so we know we need to be setting financial goals. How the heck do we actually do that?
First, focus on setting SMART financial goals — specific, measurable, attainable, relevant, and time-bound.
First, make sure your goal is specific and measurable. Don’t just say, “I want to save money.” Instead say, “I want to save $5,000 by the end of the year.” Also, make sure the goal has an end date. If you allow yourself to work toward your goal indefinitely, it will take an indefinite amount of time.
The most important part of reaching any goal is creating an actionable to-do list to make it happen. Write down every single task you’re going to have to complete to make your goal a reality.
Financial goals to set for 2020
Financial goals are so personal to what you want for your life. That being said, I know a lot of people don’t know where to start with setting financial goals. So I’m going to share some specific personal finance goal examples for you.
Create a budget (and stick to it)
I know you’re probably rolling your eyes seeing this one at the top of the list, but you knew it would be on here! Creating a budget and actually sticking to it is the one thing that makes everything else on this list possible!
It is so freaking important to have a plan for your money and to know where it is going every month. That is the difference between being in control of your finances and just being a passive bystander. Trust me, I’ve been the passive bystander and it sucks — plus you’re broke all the damn time.
When I first started getting diligent about budgeting, I just used a spreadsheet. It worked great for the first several years and really got me to stick with the practice.
Now I use a budget app called You Need a Budget. I can’t praise this tool enough! It’s a very hands-on budgeting tool, and I think it creates a lot more accountability than your traditional budgeting apps.
Build your emergency fund
Did you know that nearly one-third of Americans don’t have an emergency fund, and nearly half don’t have enough money to cover a $1,000 emergency?
As much as I’d like to think I’d never be in that situation, I was exactly that person for years.
After my divorce, I could barely afford to pay my bills — actually, I couldn’t afford to pay my bills. So I definitely wasn’t putting money away for a rainy day.
And then when things like car repairs would pop up, they’d go on the credit card. And sadly, this is the case for many people.
Make 2020 the year that you prioritize an emergency fund! Financial expert Dave Ramsey recommends putting $1,000 in your emergency fund before you prioritize paying off debt. Then, once you’re debt-free, work on putting aside three to six months of living expenses.
Automate your savings
You wanna know the single biggest thing that helped me to actually stick with putting money into savings?
For years I would tell myself that I’d take whatever money I had left at the end of the month and put it into savings. And of course, I never had anything left at the end of the money.
So what I started doing instead was having an automatic transfer move money from my checking account to my savings account on the day I got paid.
It happened on the first of the money, and it was before I ever had a chance to notice the money was in my checking account in the first place.
If you’re having trouble putting money into savings, try setting up an automatic transfer so you’re paying your savings account before you use that money for anything else.
Start a side hustle
Listen, there are a lot of financial goals in this blog post. And things like paying off debt and saving for the future cost money.
I talk a lot on this blog about designing a life you love, and for a lot of people, their dream life isn’t cheap. And that’s okay!
Rather than feel guilty for wanting expensive things like a house or a wedding or vacations, make a plan to pay for them. Having a side hustle has been the best way I’ve found to do that.
After all, you can only make the income you have go so far. Rather than pinching pennies, why not just increase your income?
My favorite ways to make money on the side have been freelance writing and my blog. I’ve always loved writing, so I don’t mind spending most of my free time doing it.
If writing isn’t your thing, no problem! There are literally endless side hustle ideas out there, and I feel like I read about new ones every day!
Make a plan to pay off your debt
I recently published a blog post about how we made a plan to pay off our six figures of debt.
Plenty of people have huge debt and just make the minimum payments every month. And for a long time, we were those people.
Making a plan completely changed the game. Just last year we were on track to have our debt paid off…well, never. Now, as long as we follow our debt pay off plan, we’ll be debt-free in less than seven years.
You know what finally pushed me to make an actual plan? I was looking at my credit card bill and it had a chart that showed when my card would be paid off if I made the minimum payment every month. It was like thirty years, and the balance wasn’t even that high!
Needless to say, I panicked and immediately started running the numbers to figure out the soonest we could possibly have our debt paid off.
If you have a lot of debt and you aren’t sure where to start, I highly recommend the tool Undebt.it, which allows you to add each of your debts and come up with a debt snowball to get it paid off sooner.
Maximize your credit card rewards
I know there are plenty of finance experts who swear up and down that credit cards are evil and no one should ever use them. And as someone who has credit card debt, I understand where this argument is coming from.
But I also completely disagree with it.
Now let me preface this by saying that if you know you can’t control your spending with a credit card and you continue to grow your balance, ignore this step and stop using credit cards.
But if that’s not a problem for you, then find a way to maximize your credit card rewards.
Some cards offer some really awesome rewards. This year for the first time, Brandon and I sat down and came up with a strategy for how we’ll use our credit cards to maximize our rewards.
We have a few credit card accounts that have different reward structures, and some have bigger wins for certain types of purchases.
For anyone who wants to get started with credit card rewards and isn’t sure where to start, I recommend getting one good cash back card and one good travel rewards card.
The most important part of this strategy is that you pay your balance off every single month so you’re never paying for interest!
And as a note, while I do have credit card debt, I never use the credit cards that have debt that I’m still paying off. I only use those that have no balance. This makes accounting a lot easier.
Save for retirement
For the first five or so years that I was out of college, I didn’t think much about saving for retirement. It seemed lifetimes away.
I was also privileged enough to find a job working for the state, where they automatically withdraw a certain percentage of income for my retirement account and provide a pretty generous match.
It wasn’t until I started reading personal finance books that I really started to think about how much money I would actually need for retirement. Would my basic retirement savings be enough?
Plus, as I prepare to leave my government job to go full-time in my business, I know that saving for retirement will be solely my responsibility — I won’t have an employer pushing it on me.
So over the past year, I spent a lot of time educating myself on individual retirement accounts (IRAs) and compound interest. Now I’ll be going into self-employment with a specific plan for saving for retirement.
If you haven’t yet started saving for retirement, now’s the time! The first book I read that was a wakeup call for me on this subject was Smart Women Finish Rich by David Bach — I seriously recommend it for all women.
Even if you’re already saving for retirement, take a few minutes to reevaluate your strategy. How much are you putting away each month, and how much do you expect that to amount to in retirement?
Are you just putting some into your company’s 401(k), or are you saving in an IRA as well? Are you saving aggressively, or just putting in the bare minimum.
Read personal finance books
Reading personal finance books was one of the biggest factors that pushed me on my own personal finance journey. Some of the books I’ve read have honestly been life-changing.
I have an entire blog post with some of the best personal finance books out there, but here are my three favorites:
1. I Will Teach You To Be Rich by Ramit Sethi. This is hands-down my favorite personal finance book. First of all, I love the way Ramit writes and I appreciate his blunt approach to financial advice. In this book, Ramit walks you through a six-week program to figure out what a rich life means for you, how to set up a budget, where to prioritize your money, and how to invest and save for the future. My copy is full of highlighter, margin notes and dog ears and I’ve gone back to it so many times!
2. Smart Women Finish Rich by David Bach. I’ve already mentioned this book, but it’s worth mentioning again. I first heard of David Bach when I was listening to a podcast where he was a guest. He was talking about how most personal finance information is geared toward men, and yet women are the ones who live longer and often spend their last years living in poverty because of the poor financial decisions of the men in their life. It was startling and totally eye-opening. He also talked about the power of compound interest and how, if you start early, it only takes a little every day to set yourself up for retirement. I can’t recommend this book enough!
3. You Are a Badass at Making Money by Jen Sincero. I’ve never paid much attention to mindset advice. It always seemed a little too woo-woo for me. I’d always take quantifiable, actionable advice over anything. And then a few things changed. First, I started learning from a life coach who blew my mind. And I read Jen Sincero’s Badass books. What a freaking game-changer. Following the advice in this book has completely changed the way I think about and talk about money. Subsequently, I’ve made exponentially more in my business since reading this book than I’ve ever made before.
Boost your credit score
I read a statistic recently that more than half of Americans never check credit their credit score. Like….literally never.
Considering your credit score can make the difference of tens of thousands of dollars in interest, that’s a pretty frightening statistic.
When you take out a loan or any kind of credit, your interest rate is based, in large part, on your credit score. The higher your credit score, the lower the interest rate you’ll get.
So when you’re talking a big purchase like a house or a college education, yeah, it can be a difference of tens of thousands of dollars.
This is another reason why I don’t agree with people’s advice to avoid credit cards at all costs. Using credit cards properly can really help you to boost your credit score!
My credit score took a huge hit when I went into debt after my divorce, and I’ve been focusing big time on getting it back up. Check out my blog post on how to repair your credit score during major life changes.
Create long-term financial goals
Setting personal finance goals for this year is amazing. But we also need to be thinking a little further in advance.
Because here’s the thing — someday you’re going to want to buy a house or have a wedding or do something else that costs a whole lot of money. And if you only set your financial goals for one year at a time, that’s going to be tough.
Brandon and I sat down together and talked about what we want the next 3-5 years of our lives to look like. We specifically nailed down the big expenses we anticipate coming up so we can start saving for them now.
For example, after we do some traveling for a couple of years, we know we’ll want to come home and buy a house. So instead of waiting until we’re done traveling to start saving for a house downpayment, I’m going to set up a budget goal for it now so we can put a little money in every month.
Your goal doesn’t have to be buying a house or planning a wedding. It might be starting a business, going on a killer vacation, or having kids. Whatever you envision your life being five years from now, start saving for it now!
Listen, we can’t do it all. And as much as I would love for all of us to tackle every single thing on this list, we’ve gotta focus on baby steps.
At the same time, I promise that if you make a budget and take at least the first step toward the rest of the financial goals on this list, you’re going to be setting yourself up for amazing things in the future.
As for us, 2020 is all about buying our RV so we can start traveling full-time. While we’re doing that, we’ll still be following our debt payoff plan so we can eliminate our six-figure debt as soon as possible!