How do I set a financial goal for the year?

This year ‘Saving more money’ was the second most popular New Year’s resolution according to a YouGov survey.

Coping with the cost-of-living crisis and trying to stay financially secure can be a challenge. Saving money may feel impossible when you’re juggling various responsibilities on a tight budget. The good news is that it’s not the only goal that could improve your financial health. Consider setting a financial goal that fits your circumstances.

Here are some other popular ones:

• Pay off debt
• Make a budget
• Start a business/pick up a side hustle
• Improve your credit score
• Financial education

The key to feeling more financially secure is to be proactive and not hide your head in the sand, but where to start? Well, this article will walk you through three simple steps to set a financial goal tailored to your unique situation and provide three top tips to help you stay on track and achieve it.

Three steps to making a financial goal

Step 1: Understand your current financial situation

Before you can set the right financial goal to meet your needs, it’s crucial to have a clear understanding of your current financial situation. Take stock of your monthly income, regular expenses, savings and debts. This process will give you a full overview of how you’re currently making use of your money.

Step 2: Set a SMART financial goal

That means set a goal that is Specific, Measurable, Achievable, Relevant, and Time-bound. So, instead of vague aspirations like ‘save more money’ or ‘pay off debt’, be specific about what you want to achieve and when. For example, a SMART goal could be, ‘Save enough money for a holiday in France this August.’

Step 3: Create a realistic action plan

Setting goals is only the first step; the real magic happens when you create a practical action plan to achieve them. Identify the steps you need to take to reach your financial objectives. It might be helpful to do a bit of research on best practises around your goal, but make sure any guidance can be found across multiple reliable sources to check it’s sound.

Finally, before you get going, take a step back and look at the plan you’ve outlined. If it feels overwhelming, overoptimistic, or relies on a huge monthly commitment to work, then you might need to adjust your SMART goal to allow for a more comfortable plan. This could simply involve breaking the goal down into a set of smaller goals that you can tackle over a longer stretch of time.

So, you’ve defined a personal financial goal and have a plan to achieve it. Here are three tips to stay on track.