“People come to the end of the year and the beginning of a new year, with ambitious goals,” says Lauren Brouhard, Senior Vice President at Fidelity Investments. “Unfortunately, a lot of times life gets in the way.” It’s not uncommon to set New Year’s goals related to money, but we easily get derailed and lose our motivation. We talk about setting financial goals that stick.
After all, many of us want to improve our finances. A new year seems like a natural time to improve your financial habits.
As simple as it is to set new financial goals, however, achieving those goals isn’t always easy.
However, a recent survey from Fidelity indicates that setting goals is one of the best ways to develop good financial habits down the road — even if you don’t manage to completely fulfill your goal. “The simple act of making financial resolutions helps people improve their financial condition,” Brouhard says.
Do You Set Financial Goals?
Last year, according to Fidelity’s survey, 31 percent of Americans set financial goals. This year 37 percent are planning to set financial goals for 2016, an increase from last year but still below 2014’s 43 percent.
Brouhard says that consumers are more likely to set financial goals when they’re concerned about their finances. During tough financial times, setting goals is a way for consumers to figure out how they can get back on track. However, the need to set goals fades as finances improve.
That’s not always a good thing, though. Even if you feel as though you’re doing better financially, there’s always room for improvement. Besides, setting goals can help you make financial progress — and result in better feelings about your finances.
Of those who achieved or nearly achieved their financial goals, 56 percent claim they have improved finances, while only 34 percent of those who fell short can say the same.
The fact that, overall, financial goal-setting is down is troubling to Brouhard. “There is a little complacency setting in,” she points out. “Now is not the time to drop the ball. If you want to develop better financial habits, goals can help.”
Setting Goals Helps Develop Better Financial Habits
“The simple act of making financial resolutions helps people improve their financial condition,” Brouhard says. “The first step is to write it down and commit to it.”
However, before you set a goal, it makes sense to consider your priorities and values. There are a number of consumers who set goals that don’t really matter to them, which makes it difficult to carry through with the goals and develop better habits. “Sometimes, people don’t have strong enough convictions or intent around their goals,” says Brouhard.
If you want to set goals that will truly help change your habits and better your financial situation, you need to start with something that’s important to you. Decide what you want to change about your finances, and then set goals that help move you in that direction. “The act of committing is really going to help you achieve the longer-term vision for yourself,” says Brouhard.
When setting goals, choose one to work on a little at a time. Setting several ambitious goals at once is a short road to disaster, since it’s unrealistic to do everything in one year. Additionally, while it’s natural to set goals as the year turns over, it’s a mistake to get hung up on one time of year. Instead of focusing too much on the end you wish you could achieve, break your goals down into smaller, achievable steps, and make it about the progress.
Even if you don’t reach your goal in its entirety, it’s still possible to use your efforts toward reaching the goal to better your financial situation. “Understand what the impact is going to be,” suggests Brouhard. “When you feel encouraged by the progress made so far, it’s easier to stick with it.”
After setting goals that matter to you, breaking them down into achievable and measurable steps, and working toward those goals, there is a good chance you will develop at least a few better financial habits. Being able to understand the end game, especially if the goal is something that matters to you, is crucial to making progress on your goals and developing better long-term financial habits.
Positive changes aren’t going to happen overnight. However, the process of setting goals and working toward achieving them can go a long way toward helping you improve your finances.
How do you stay on track with your goals? What kind of financial habit are you creating right now?