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It’s Time to Get SMART About Financial New Year’s Resolutions

Most New Year’s resolutions are broken by the middle of February. Learn how to make resolutions that stick by using the SMART approach.

https://tickertapecdn.tdameritrade.com/assets/images/pages/md/Champagne & friends: Getting SMART about New Year's resolutions
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Key Takeaways

  • Most New Year’s resolutions are broken by mid-February each year
  • Learn how the SMART approach—making goals that are specific, measurable, attainable, relevant, and time-based—can help keep you on track

Ahh. New Year’s resolutions. We love to make them, and we love to break them, sometimes within the first week. 

How about you? What’s your personal record on New Year’s resolutions? Did you resolve to get in shape and join a health club, but stop going by the end of that first month? Is there a stack of books in the corner under an inch of dust from the book-of-the-month club you joined three Januaries ago?

What about your financial New Year’s resolutions? Did you bust the budget with an unplanned, gotta-have-it purchase, just a few weeks after promising to contribute every spare dollar to your retirement fund? 

According to a report by U.S. News, about 80% of resolutions are broken by Valentine’s Day.  

But not this year. This is the year we’re getting serious about financial resolutions. We’re going to set sensible, achievable financial goals, and we’re going to make them stick until the ball drops next New Year’s Eve—and beyond.

In other words, we’re going to get SMART about resolution-setting. 

SMART: It’s a Mental State and an Acronym

According to a goal-planning study by TD Ameritrade, those with a financial plan are three times as likely to be confident they’ll reach their retirement goals. They also have higher goals for retirement than those without a plan and almost double the current savings toward retirement.One key component of a solid, sustainable financial plan is making it SMART:

  • Specific. A clear and detailed financial resolution can help you keep on track (and keep you from cheating).
  • Measurable. You can’t call it an achievement if you can’t track your progress.
  • Attainable. Set the bar too high and you’re setting yourself up for failure.
  • Relevant. Your goals should be a means to an end.
  • Time-based. Like that carton of milk in the fridge, goals should come with a “use-by” date.

But before getting to your SMART resolutions for 2020, you need to know where things currently stand. And what better time to do that than the new year? After all, you’re already getting all of your tax documents together, so you’ve got all those pay stubs, investment statements, expense receipts, and credit card tallies. Use this time to take a look at your overall financial situation. 

SMART goals are specific, measurable, attainable, relevant, and time-based.

As of the end of the year, what do you have, and what do you owe? Have your expenses stayed in line with your income? If not, perhaps you could use a refresher on budgeting

It’s a SMART Game: Lay Out the Pieces and Play It in Reverse 

Want to play it SMART? Do like the chess masters do. Plot the game all the way to its ending and play the game in reverse—right back to where you are. Suppose you’re just starting out. Maybe your life plan looks something like this:

  1. Set up an emergency fund with six months’ worth of income
  2. Pay down $3,000 of revolving credit
  3. Pay off $7,500 in student loans within five years
  4. Get married, buy a $300,000 house, have a family—two kids and a dog—within 10 years
  5. Save $50,000 per child by the time each is ready for college 
  6. Retire with $1.5 million by age 65

Notice that these steps are all specific, measurable, and time-based. This plan may be relevant to your goals. But is it attainable? That’s where your New Year’s resolutions come in. Ask yourself, “What can I do this year to help achieve each of my goals?” Then ask yourself the same question next year, and the following year, and the year after that.

How do you play this game in reverse? You could start with a financial calculator such as the TD Ameritrade Retirement Calculator, which can help you set your goals, gauge your progress, and keep you on track. And if you need hands-on assistance, consider setting up a complimentary goal-planning session with a TD Ameritrade Financial Consultant.       

Putting It All Together

You’ve analyzed your income and expenses, and you’ve got your budget in place. You’ve set up your life plan, perhaps with help from a professional. And you’ve worked backwards to today. Can you get where you’d like to be with your current and expected future household cash flow? 

If not, what tweaks will you need to make? Are we talking small, like exchanging the daily caramel macchiato for home brew in a travel mug? Or will it take something more, like dialing back your vacation expenses, or selling the car and taking the bus to work? Alternatively, you might choose to reconsider some of your goals. You could opt for a more modest house, wait to expand the family until your goals are on track, or perhaps even plan to extend your working years past age 65. 

There are many ways to go about making your goals attainable. You just need to find the right formula for you. 

Don’t feel you have the willpower to stick to your budget? Put it on autopilot. The Consumer Federation of America said the easiest and most effective way to save is automatically. Company-sponsored 401(k) and other retirement plans can deduct savings from your paycheck automatically. And remember, a company match (if your employer offers one) is there for the taking, so be sure to take full advantage of it. Your bank may also allow automatic transfers between your checking account and a savings or investment account.

One final note: It’s important to review your financial goals periodically to make sure you’ve accounted for any changes, for better or for worse. Did you plan for three children and end up with two, or four, or more? That may determine the house size you need, and it will definitely affect the amount you need to save for college educations. Or maybe a job opportunity requires relocation. 

The point is, your plan will need an occasional tweak. But if you stay focused on your end goals, you’ll get there. Just remember to stay SMART. Happy New Year!


Key Takeaways

  • Most New Year’s resolutions are broken by mid-February each year
  • Learn how the SMART approach—making goals that are specific, measurable, attainable, relevant, and time-based—can help keep you on track

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