As we near the end of another year, it’s the perfect time to start thinking about setting your financial goals for the upcoming year. And while it’s important to look ahead and plan for the future, it’s also essential to take a moment to pause and look back on the spending decisions you’ve made throughout the year. This allows you to reflect on your purchases, expected expenses, and new savings goals. And most importantly, it'll help you stay motivated as you make strides towards financial freedom.
In this blog, we’ll discuss how to reflect on your spending decisions from the past year and use that information to set realistic and achievable financial goals for the new year. So, whether you’re a seasoned professional or just starting out, let’s dive in and create a plan for a financially secure future.
1. Look Back on Your Best Purchases
Every day we're faced with spending decisions. Think back to how you spent over the last 12 months and the decisions that really felt worth the price. Take note of purchases that brought you the most joy and benefit to your life. Was it a new car that helped you get to work faster and more efficiently? Or, perhaps it was a new education course that advanced your career. Whatever it may be, these purchases have value and are worth recognizing.
2. Anticipate Upcoming Expenses
Take a moment to list out any expected expenses in the new year. Whether it’s a new car payment, moving costs, or a family trip, it’s essential to know what’s coming down the pipeline before setting financial goals.
Once you’ve identified upcoming expenses, determine which are needs versus wants. Does investing in a gym membership or monthly clothes subscription make sense in the upcoming year? Similarly, can you reduce the amount you spend on eating out, or cut down internet costs by opting for a less expensive alternative?
Keep in mind that small changes can lead to large savings, and it’s all about being mindful and intentional about where your money goes.
3. Set New Savings Goals
Now that you’ve identified your best purchases and anticipated expenses, it's time to think about your new savings goals. This is where you decide how much money you want to save and where you want to allocate those funds.
Start by setting realistic and achievable goals that are in line with your lifestyle. It’s important not to be too hard on yourself – if your goal is to save $500 a month, work towards that, even if it seems small.
Consider setting specific targets for reaching your goals, like paying off debt or buying a new home. Having these specific targets helps motivate you and gives you something to work towards.
4. Create a Budget
Finally, to ensure you’re on track to meeting your new savings goals for the upcoming year, you’ll need to create a budget. This will help you stay accountable and ensure you’re not overspending in areas that may hurt your financial goals.
Start by creating a list of all your expenses – both fixed and variable – and then determine how much income you have coming in each month. From here, allocate amounts for saving and build in a margin for discretionary spending.
Remember that budgets are not meant to be restrictive, but instead helpful tools that enable us to make the most of our finances. If you find that you need to make adjustments to your budget, don’t hesitate to make changes where needed.
As you begin your financial planning for the new year, take a moment to reflect on your past spending decisions. By looking back, you can identify purchases that brought value and anticipate upcoming expenses, both of which are instrumental in setting achievable financial goals. By setting realistic targets for savings, staying accountable through budgeting and tracking progress, you can make significant strides toward achieving your financial goals. Remember, small steps can lead to significant gains, and it’s never too late to start.