The new year is a great time to take a look at your finances and set new financial goals, especially for the 81% of young adults that plan to own a home. Unfortunately, nearly 20% of those millennials plan to dip into their retirement accounts to fund the down payment—but it doesn’t have to be that way.
With appropriate goal-setting (and a little help from a pro doesn’t hurt), you can make a plan to get on track for retirement, home-ownership, or any other dreams that need financing.
Today, we want to walk through the basics of setting smart goals for 2022, plus the tools and strategies you can use to get started and stay on target.
What Makes a Good Goal?
It’s the morning of January 1, and you’ve just woken up to a brand new year ahead of you. It’s time to set some goals—but where do you begin?
Choosing the right goals for your resolutions can be the difference between success and failure, especially for financial plans. So, what makes a good goal?
One popular (and wise) starting place is the SMART goal method.
SMART = Specific, Measurable, Attainable, Relevant, and Time-bound. The SMART method helps you narrow your focus and track progress in a realistic way, no matter what kind of goals you want to achieve.
Short-term vs. Long-term Goals
Short-term goals generally have an end date within a few years, such as a dream vacation to Paris next summer or sending a kid to college in two years. It might be worth your while to set up individual savings accounts for your short-term goals, or to create a single lumped-together account for multiple short-term goals. You’ll want to keep these funds in a more accessible place, because you’ll be needing them sometime soon.
In contrast, long-term goals are more useful if your vision for the future still has some question marks around it. Maybe you’ll want a new house down the road, or to eventually go back to school. Regardless, you’re probably not going to be touching this money for a while, so it makes sense that your investment strategy is different here than with your short-term goal funds.
Narrowing down your resolutions into specifics and creating a time table for your goals will help you get on track to make smart investment decisions for the short-term and long-term.
Choosing Your Goal(s) for 2022
Your goals will depend largely on your current age and stage in life, because financial planning isn’t one-size-fits-all. If you’re 30 years old and just jumping into a career change, your financial goals are going to look different from the 50-year-old business owner’s.
However, if you don’t already have an emergency fund, we recommend starting there. Recent studies show that although 86% of millennials have financial goals for the next five years, 69% of them don’t have an emergency fund, and 68% don’t have a savings account outside of a retirement fund.
An emergency fund, or “rainy day fund” serves as a safety net for the unexpected, such as a sudden job loss, a car breaking down, or an urgent medical situation. In these cases, your emergency fund helps prevent you from diverting funds from your other goals.
Figuring out how much money to save for an emergency begins with calculating the amount you and your family need to survive each month, and multiplying that number by at least 6 months.
Visualize Your Future
If you’ve already got your emergency fund in place, then you can start prioritizing your savings based on how much you need for each goal, as well as their different timelines.
If you’ve got college tuition coming up in three years, a goal for a vacation home in five years, and retirement in 30 years, you can set specific, realistic goals for each and tackle them simultaneously. That might look like $100 a month invested in a Roth IRA, $250 a month in a college savings account, and another $100 in a high-yield savings account.
The key is to make your savings goals as specific as possible, and to check in regularly. If you find that your savings plan no longer aligns with your goals, don’t be afraid to make changes.
Thinking about what you want to accomplish in the next one, three, five, and 10 years can help you visualize how to divide and invest your money, and guide you in achieving all your financial goals.
Working with a professional can help you be more confident in hitting your goals
With modern financial technology tools available, setting financial goals can be easier than you think, even without a lot of technical knowledge. For those who struggle with staying on top of their goals, there are tech assistants that can automate your savings, making your investments for you without any heavy lifting on your part, no matter what goals you’re saving for.
If you’re looking for help, the free Lasso app allows you to set specific financial goals for anything you want, including:
- An emergency fund
- A future home purchase
- A custom goal
Plus, with the Lasso app, you can anonymously connect to an advisor to help you review and strengthen your financial goal setting. Having the input of an experienced professional can give you the confidence you need to stay on track for your goals, or to help guide you through that initial goal-setting process.
To get started with your financial goals in 2022, download the Lasso app and create your individualized profile, create smart goals, and connect with an experienced advisor.