Toss Out Your Resolutions: Create Goals Instead, part 1.
January 4th, 2008 | by Molly's Brother |This month, we’ll explore the idea of tossing out financial resolutions.
Instead, we’ll focus on how to create feasible financial goals.
New Year’s Resolutions fail. People plan them on a whim moments before the New Year, commit themselves to “make it happen” this year and, three weeks in, the “resolutions” are put away on a rear shelf in the memory, only to be dusted off again next year.
Instead of “resolving” to change, why not approach this practice from a different perspective? Why not develop a goal and plan out a course of action in order to achieve those goals? “So,” you might be thinking, “what difference does it make? What’s the difference between a goal and a resolution?”
1. Goals vs. Resolutions. Resolutions are often hefty ideas, broad thoughts that are thrown out with much thought about the desired change, but without a sound plan to see those results. Goals on the other hand are supported by incremental changes, small steps that will get you from point A to point B and beyond. Usually, goals are a little bit more thought out and are supported by a more detailed plan of action.
2. How to make goals work for you. Spend some time thinking about the goal. Make the “Financial Goal for 2008″ as big and as broad as possible. But also make sure it is attainable! Let’s play here. Let’s say a financial goal that you want to create is to reduce your credit card debt. Figure out an amount that is hefty–but attainable. For example, if you make $30,000/year and you have $15,000 in credit card debt, chances are you won’t be able to pay off all $15K. So, create a goal that you can reach. Perhaps, with some thought you decide to pay off $4,000 of your credit card debt. It is a smaller amount, but something that you will still have to work towards.
3. Create an Action Plan. Now, you have your overall Financial Goal for 2008: Reduce credit card debt by $4,000. Now you have to sit down and create an Action Plan. Try to come up with three smaller goals that support the larger Financial Goal. Let’s call these smaller goals “objectives.” Three objectives might be: 1) Make more money; 2) Reduce monthly expenses in order to increase credit card payments; 3) Stop using credit cards.
4. Create Tasks to Reach Objectives. Let’s look at your first objective.
- Objective: Make More Money
- Task 1: Sell stuff on ebay to raise money.
- Task 2: Find a part-time job to make extra money.
- Task 3: Be on the lookout for other money-making opportunities each week.
In thinking about this objective, let’s dissect what “making more money” really entails. So, you want to reduce your credit card debt by $4,000. I used a Bankrate.com calculator to come up with the following: $15,000 credit card debt at 18% interest. Monthly minimum payments will be $375. You will need to raise your monthly payments by $156.75 to $531.75 in order to reduce your credit card debt by $4,000 over the year. Each month, you only need to find a way to make an extra $150/month.
It will entail finding a way to make an extra $37.50 a week! Using the three tasks above, you can find a way to do this.
