Awa Sow
New year, new beginnings! The new year is usually full of hopes and new resolutions. It’s the best time to set your goals, especially the financial goals you’d like to accomplish. Setting goals is an essential factor in finding success for your financial journey. Here are 7 financial goals you can set for yourself in 2023.
1. Educate yourself about money
Education is the first step to personal finance. Unfortunately, most people don’t know how money works. I mean, how should we, when none of this is taught in school. All of us need money and use it everyday for our daily living but the majority of us don’t know a lot about money. Except, when it comes to earning the money and spending it to buy the things we love.
How can you expect to make the right decisions regarding your finances if you don’t educate yourself about personal finance? Learning about money will give you basic knowledge you can use to start working towards financial stability. There are plenty of resources online to help you achieve this. However, make sure the information you get online is from a reliable source. You can find some information on financial institutions’ websites as well as the governments websites and plenty of well known blogs.
Financial advisors are also here to help you setup your financial goals and help give you the right resources to achieve them. Find yourself a reliable financial advisor to help you in your financial journey. To take control of your finances today, you’ll need to know where you stand. In order to figure out your financial health, you’ll need to know how much you make (your income), how much you spend (your expenses) and how much you owe ( your debts). Click here to get an in depth article on how to do this.
2. Start budgeting regularly
One of the most important goals you can accomplish this year, is creating a budget that works for you and sticking to it. Budgeting helps you keep track of your money so you know where you are spending every dollar you earn.
Making a budget is one of the first steps in taking control of your finances. However, this has been proven to be a difficult task for even the most financially savvy. The idea is not only to make a budget but to also do your best to stick to it. A budget also needs to be tweaked from time to time to better suit your needs. Ideally, you’ll want to create a budget at the beginning of every month and review it every few days or every week in order to track your expenses. This way you not only keep on top of your expenses but you also make sure you know how much you have left so you don’t go over your predicted expenses.
If you want to get ahead financially, you need to make sure you don’t spend more than you earn every month. Which is why it’s important to do your budget every month before it begins to track your expenses and make sure you are spending your money efficiently. So, if you’re new at this, your goal this year is to make a budget and review it so you can get into this habit starting now which will help you in the future.
3. Focus on paying off debt
Living with bad debt can really slow you down in your financial journey. Paying off debt should be one of the first things you focus on if you want to get ahead financially. While paying off debt is not an easy task, mastering this can help to positively impact your finances and achieve Financial Freedom.
Bad debt is borrowing money to finance a rapidly depreciating asset (i.e. a car, clothes, a boat, electronics etc.) or to purchase property that does not generate a revenue. On this note, bad debt also involves paying a high interest on your loans. These interest payments take a huge bite on your money every month.
The most common debt is credit card debt which usually has interest rates between 12% and 24%. The longer your credit card balance remains unpaid the higher the interest payments you’ll have to make on the loan and the more it eats from your hard earned money. This money is better used for your savings purposes or various other projects. This is why, it’s very important that you focus on paying off debt this year so you can have more of your future earnings for yourself.
There are a few methods used to pay of debt: the Debt Avalanche method and the Debt Snowball method. For more information on how these methods work, click here.
4. Set up an emergency fund
Another important goal you can achieve this year is to start an emergency fund if you don’t have one. An emergency fund helps you save for a rainy day. Don’t wait until you get hit with an unexpected expense to start figuring out how to deal with it. Not only will having an emergency fund remove the stress of having to figure out how to deal with the issue, but it will also prevent you from having to go into debt to resolve the situation. Here are examples of emergency savings: home repair/maintenance, auto maintenance, etc.
You should also have an emergency fund to help cover an unexpected income loss. No job is 100% secure. You never know when you might be laid off or suddenly stop getting a paycheck. For this reason, you’ll need an emergency fund to help cover your monthly expenses. Ideally, you’ll want to save between three to six months of your monthly expenses. This amount will need to be deposited in a readily accessible savings account in the case of an emergency.
While we’re still on the topic of saving, you should also put money aside for expenses you know are coming every year. The following are examples of savings for expected expenses: Christmas, birthday gifts, wedding gifts, or any other holiday you observe that require you to do some spending. By having money set aside for these occasions, you avoid over spending and you will feel great knowing that those expenses are taken care of come time to celebrate.
5. Start saving for retirement
Retirement years are fast approaching. You’ll need to make sure you have enough money set aside for your retirement years. While there are government retirement incomes like the Canada Pension Plan (CPP) or the Quebec Pension Plan (QPP), these sources of income are just not sufficient to cover your expenses in full in your retirement years. So you’d do well to set up an RRSP and start contributing regularly to allow for these amounts to have time to grow until you need them.
If you’re currently working with a company that offers a pension plan or a group RRSP, make sure you get in on that action as well. Pension plans and group RRSPs are usually matched by the employer. Meaning that the company also contributes to your account based on your personal contribution amount.
The bottom line
When it comes to your finances, the key to setting goals is to make sure you set them and revise them regularly. Keep in mind that it’s never to late to start doing the right thing. Starting today is better than not starting at all. No goal is too small. Start with realistic goals you can accomplish, which will motivate you to keep going in achieving the bigger ones. Start making positive changes to your finances this year so you can reap the benefits for future years to come.
