How to Create and Customize Your 2021 Financial Goals

Many people look at the turning of the calendar year as an opportunity for a fresh start. It’s an opportunity to close the door on a year that perhaps didn’t go as we wanted (and for most of us, 2020 certainly fits the bill), but it’s also a chance to have a fresh blank year ahead of us.

That sense of opportunity is often expressed in the form of a yearly goal or a New Year’s resolution. They’re often personal improvement goals, done with the best of intention, but then the wheels fall off them in a month or two.

Why does that happen? Often, it’s because the goal wasn’t chosen well, or because it wasn’t really optimized for your life situation. Here are some common financial goals that people may choose, as well as some strategies for how to optimize them and personalize them just for you.

In this article

    6 common financial goals for 2021

    Create a budget

    A budget is simply a way to divide up your income into different pools for different types of spending, so that you make sure you have enough for each different area where you spend money like food, rent, clothing, and utilities. Creating a budget and then perfecting it is a powerful way to get in touch with where all of your money is going. 

    Stick to a budget

    Creating a budget is only half the battle. Actually, sticking to it is also a challenge. It involves some willpower, as well as some problem-solving skills as you figure out why your budget isn’t working and how to fix it. This goal is also all about making better decisions in the heat of the moment, as you want to master your ability to actually stick to your budget even after you’ve optimized it.

    Pay off debt

    Many people resolve to get rid of some (or all) of their debt in the coming year so that they’re no longer paying interest payments to banks and get to hold on to that money for themselves. The first step in that process is constructing a debt repayment plan, and making that plan automatic is a key part of making sure that it’s successful throughout the year.

    [ More: Use Automatic Payments to Keep Your Finances on Track ]

    Contribute to a retirement plan

    Resolving to start contributions (or contribute more) to your workplace retirement plan or your individual retirement plan is a powerful goal that sets you up for long-term success. 

    Create a long-term financial plan

    What are your lifelong goals, and how do your finances play into that? Most of us have a loose collection of thoughts on those things, but turning those ideas into an actionable financial plan is a powerful additional step, particularly when you begin acting on that plan. This requires a lot of thought and planning to pull off well, as our lives sometimes go in unexpected directions, but making a smart financial plan that can flex with your life means it will keep working for you, no matter what. 

    [ Next: The Ultimate Retirement Guide ]

    Set up an emergency fund

    Most Americans simply don’t have an emergency fund, which is a pool of cash set aside for unexpected events. According to CNBC, only 41% of Americans can cover a $1,000 emergency with savings, meaning that most Americans are only one problem away from going into debt or suffering financial calamity. The solution is an emergency fund. It’s surprisingly simple to set up an emergency fund of your own that grows automatically, creating peace of mind as well as a resource to draw on when things don’t go as planned.

    How to personalize your 2021 financial goals

    These goals sound great, but how do you make sure that they don’t fall apart by February? The key is to devise a personalized goal that’s actually designed for success from the start, and make sure that your goal is optimized for the long term and that your financial goal is practical. Devise a SMART personal finance goal — specific, measurable, actionable, realistic, and time-limited. Here’s how to make a vague personal finance goal SMART.

    Consider what’s realistic in your current situation

    Is your goal something you can realistically pull off in your current situation? Many people devise a goal that’s completely unrealistic and far outside the bounds of what they can actually achieve, setting themselves up for failure. Devise an achievable goal if you take small, positive, consistent steps throughout the year. Avoid goals that require you to make radical life changes, especially ones that require continuous effort or willpower or thought to maintain.

    Give the goal a specific time frame and outcome

    Specify what exactly it is that you want to achieve and when you want to achieve it. Give yourself an end date, as well as very specifically identify what you will have done by that date. For example, “building an emergency fund” is a noble goal, but it doesn’t specify exactly what that means or when you want to achieve it by. Instead, you should say “I will have an emergency fund started by the end of the week and a healthy emergency fund built by the end of the year.”

    [ Read: The Best High-Yield Savings Accounts ]

    Make the outcome based on your actions as much as possible

    It is a good idea to have the goal centered around your efforts rather than on results that may not be fully under your control. For example, if you have a savings goal, focus more on the changes you’ll make to save rather than the actual financial output, so that if an emergency happens or something changes, your goal doesn’t fall apart. Rather than “I will have a healthy emergency fund by the end of the year,” which may or may not happen depending on your life, instead choose a goal of “I will put money aside each week for my emergency fund,” which is focused on your efforts.

    Make sure that the outcome is measurable

    It should be obvious whether you succeeded in your goal or didn’t, and the easiest way to do that is to give yourself a numerical goal. As noted above, this goal should be oriented around your effort rather than the overall outcome. So, for example, you might have a goal of “I will put money aside for an emergency 50 out of 52 weeks this year,” which focuses on your efforts and is very measurable. Aim to make that number easy to achieve by automating it.

    Identify specific, actionable steps you can take

    A final thing to consider with your goal is to think about the specific actions you will take to make this goal happen. What exactly will you do differently each day or each week to make this happen that you’re not doing right now? For example, with the emergency fund goal above, you’re moving money into that savings account each week. That’s your weekly action, and if you choose to automate it, the process of setting up an automatic transfer is another action you can take for your goal. Think of your goal entirely in terms of your specific actions that you’re doing and focus your goal on those rather than the big outcome.

    We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

    Trent Hamm

    Founder & Columnist

    Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.

    Reviewed by

    • Courtney Mihocik
      Courtney Mihocik
      Loans Editor

      Courtney Mihocik is an editor at The Simple Dollar who specializes in personal loans, student loans, auto loans, and debt consolidation loans. She is a former writer and contributing editor to Interest.com, PersonalLoans.org, and elsewhere.