8 Simple Rules for Setting Your Financial Goals in the New Year

by | Jan 2, 2023 | Finance

Even though January 1 is really no different from December 31, with each new year comes a fresh start to make positive changes. Common new year’s resolutions center around self improvement, so make sure to include your finances! 

Not only can setting financial goals help you achieve important long-term milestones like homeownership and retirement savings, but they also help you be more purposeful with your spending. 

However, just setting goals isn’t enough. You need to select the right ones that consider your unique situation. Use these simple rules to set stronger financial goals and start the new year strong!

1. Be S.M.A.R.T.

You want to set goals that follow the S.M.A.R.T. formula: specific, measurable, attainable, realistic and time-bound. All these aspects play into creating goals that fit your situation, resources and objectives. 

Let’s walk through an example of setting a goal using this framework. Someone might have a goal to “save more money.” 

Specific – I have a goal to save $5,000.

Measurable – I can measure how much I have saved by creating a new savings account and tracking my progress there.

Attainable – I know it’s possible for me to save this amount because I have the disposable income required.

Realistic – I know it’s realistic for me to save this amount because I don’t have to make dramatic cuts to my spending or lifestyle to achieve it.

Time-bound – I would like to reach my goal in the span of one year, which means saving about $417 per month.

It’s clear how by following this framework, the goal-setter has to think through lots of circumstances or factors that surround the goal. That can increase the chances of success.

2. Know how much you’re working with

Setting unrealistic expectations is a very common reason people fail to meet their goals. If you set a goal to pay back $30,000 in student loans this year, but don’t have enough left over after bills to do so, you may get discouraged and fall off track – even if you still make great progress at paying some of the loan back!

To set realistic and attainable goals, you must start with a solid understanding of your finances. Use last year’s budget or calculate your average monthly expenses to estimate your disposable income. This will help you determine how much you can set aside and decide how much to put toward each goal if you have more than one. You can also identify potential areas to curb spending if you want to set aside a little extra.

3. Prioritize debts, your safety net and retirement

If you want a quick start to set your goals for the year, focus on the following areas: paying off debts, building an emergency fund, and saving for retirement.

Debts, particularly high-interest ones like credit cards, accrue interest. The longer you take to pay them back, the more it will cost you in the long run. If you have multiple debts, you can be strategic about the order in which you pay them off. You could try the avalanche method – prioritizing the highest interest debts to cut back on the cost. Or, you could use the snowball method – paying off the balances in order of smallest to largest to reduce the number of unpaid loans.

An emergency fund is a financial must-have. In case of a loss of income through a job loss, family emergency, or medical issue, an emergency fund can help you meet your everyday financial needs while you take care of whatever life has thrown your way. The standard recommendation is to save three to six months’ worth of expenses. 

Retirement is typically the most significant financial goal a person can have. Starting early allows you to benefit from things like compound interest, employer matching contributions, or dividends accumulating. Review if your employer offers a 401k or 403b retirement account and any contribution match benefits. If you get an annual pay raise that starts at the beginning of the new year, one trick to save more is to increase the amount you contribute to your retirement so you’re not tempted to spend the raise. And, you can set up individual retirement accounts which have different tax advantages.

4. Automate when possible

Make it easier to save by automating deposits into your checking and retirement accounts. It’s one less thing to worry about and removes the temptation to spend the money instead. You can either set up timed deposits through your bank or, if your employer uses direct deposit, provide them with the additional account information and request that a specified amount goes into an account each pay period. Automatic deposits also provide further clarity for your budget, reducing the chance you’ll account for funds that aren’t available.

5. Learn to prioritize

Time and cost are significant factors in determining goal priority and are the keys to managing multiple financial goals. For example, if you are trying to pay off your credit card debt and save up for a new car, the credit card should take priority. Interest accrues daily for credit card debt; the longer you take, the more you’ll pay.

If it’s unclear which goals to prioritize, another helpful way to decide is to think about which types of scenarios would cause you more disruption or cost to solve the problem. Think through the secondary costs that stem from various situations. For example, if your car needed a major repair or replacement, could you reasonably rely on public transit to get around in the meantime, or would you need to spend more on a rental car or rideshare fares? If it’s the latter, having the savings ready to go to fix the initial car issue might be more beneficial because you can avoid incurring more secondary costs. 

6. Focus on needs over wants

One of the most complex parts of money is spending it on what we need versus what we want. A functioning plumbing system doesn’t sound as exciting as a luxury cruise, but you use your plumbing every day, and it’s pretty emergent to fix if it stops working.

While you can work toward multiple goals at once, if it comes down to choosing one over the other, focus on covering your bases first. If you need extra motivation, try using smaller wants as rewards when you complete larger, less exciting goals. For example, once you pay off your car loan, why not treat yourself to a fancy dinner or a new pair of shoes?

Just because something important or necessary takes priority doesn’t mean you have to go all-in and sacrifice everything fun. You can save up for an important home repair while also saving a bit for something fun like a trip, concert tickets, or new video game console. It’s just important to save and spend proportionally to how much you need the item in your life. 

7. Keep things flexible

Too often, we view goals as permanent and immutable, but the truth is they change constantly. You can’t predict what will happen in the next 12 months, and what you’ve planned for now might not be feasible four months from now. Maybe your family welcomes a new baby or pet which comes with added cost and lifestyle adjustment. Maybe you get a new job that brings you more satisfaction, but you miss out on a specific benefit or perk from your past job. 

 You may have to adjust your goals based on what is realistic for your new situation. And that’s okay! Change is not the same as failure. Review, revise and keep moving forward.

8. Keep changes manageable

As you work through your budget and goals for the new year, you might be tempted to cut back on certain expenses to reach your goals even faster. While cutting back on unnecessary spending is a good thing, trying to cut back too much too quickly increases the risk of giving in to the temptation to spend. Here are some specific tips: 

  • Leave some room for small luxuries
  • Cut out things that would be easy to replace if you had to – i.e. canceling a streaming service
  • Work slowly to adjust to things that can save money
  • Adopt a “use what you have” mindset
  • Plan for bigger expenses in the future early so you don’t have to miss out or fall off track


Financial goals are a great way to start the new year off on the right foot and set yourself up for future success. You can serve yourself even better by thinking through the circumstances around your goal so you can set goals you’re more likely to achieve. No matter what steps you take, you’re working toward a better future – and that’s commendable!

Keep reading on the Milli blog:

Aspirational Spending: What is it, and how to Combat It
Top Banking Terms You Should Know
How to Cover Unexpected Expenses