New Year, New Goals: Develop a Plan

January 2022

Barbara O’Neill, Ph.D., CFP®
Distinguished Professor and Extension Financial Management Specialist Emeritus
Rutgers Cooperative Extension

At the start of a new year, many people resolve to make changes in their lives: lose weight, get organized, save money, spend more time with family, quit smoking, get more exercise, and do better in general. While we often call these plans "resolutions," they are essentially goals.

Setting goals is a lot like planning your next vacation. In order to develop both an action plan and a travel itinerary, you must know your starting point and destination and the time frame and cost of the "journey."

Below are ten tips to achieve your goals in 2022:

1. Start With Your Dreams- Remember that a dream is vague like "I want to send my child to a good college," or "I want to be comfortable in retirement." A goal is specific and has dates for beginning and ending (e.g., "I will start saving this month to save $20,000 for the down payment on a townhouse").
2. Be Specific- Write down what you want to accomplish and when. Goals should be "SMART": Specific, Measurable, Attainable, Realistic, and Time-related. In other words, they should have a definite outcome and deadline and be within reach, based on personal income and assets.
3. Develop an Action Plan- Work backwards to break a goal into small pieces. The more specific a financial goal, the easier it is to determine how much savings is required. For example, a $20,000 "new used" car in 5 years will require $4,000 in annual savings or about $77 per weekly paycheck.
4. Consider Opportunity Costs- Measure the cost of something, not only by its price tag, but by what you give up by losing the opportunity to do something else with your money. For example, if you have the money for either a car down payment or a vacation and you choose the car, you could forego the vacation.
5. Pay Attention to "Small Stuff"- Don't forget that small steps add up and can lead to big rewards. If you want to save money, you won't do it if you don't pay attention to where nickels, dimes, and dollars go every day. Ditto for paying attention to calories in food if you are trying to lose weight. Decisions that you make daily will determine the outcome of your goals.
6. Address Your Obstacles- Think of all the things that might prevent you from reaching your goal. Write them down on a sheet of paper. Beside each obstacle you list, write down several ways you could overcome the obstacle. For example, automating savings to "pay yourself first."
7. Share Your Goals- Tell other people about your goals so there are people to support you and hold you accountable. You will be less likely to get "off track" if people that you know and love are encouraging you and watching your progress.
8. Identify Resources- Identify people and/or places to help you achieve your goal. Are there books you could read or a group of people who are working toward the same goal? Are there family, friends, or mentors at work who could assist you in some way? Reach out for help, if needed.
9. Reward Yourself- Give yourself small rewards along the way for encouragement and motivation. As you reach milestones toward accomplishing your goal (e.g., saving $1,000), do something fun that you enjoy (e.g., attending a play or eating at a nice restaurant).
10. Evaluate and Adjust- If you aren't making progress, re-group. Don't give up. Adjust your plan. See what is working and what is not. Look at how you spend your time, energy and money. Are you moving toward your goals? If not, make some necessary adjustments.

In summary, think SMART goals when you are thinking about making changes in your life. Research indicates that people who take the time to set goals and plan ahead are more successful financially.

Remember, people don't plan to fail, they fail to plan--and set goals with specific action plans.