I love this time of year.
The new year gives us a chance to reflect on what we’ve done with our life, and it provides an opportunity to determine to accomplish more in the future. It helps us refocus on what matters most.
When we take the new year seriously and set meaningful goals, we’re well on our way to creating a life full of purpose and passion.
Here are four financial goals we should all set to ensure we create a better life for ourselves and for those around us.
#1. How Much Income Do You Want To Generate This Year?
Increasing your income can dramatically bolster your financial freedom so long as you don’t let your lifestyle inflate too.
Here’s the problem: most folks rely solely on their employer to increase the amount of their paycheck. They don’t have a plan to generate extra income outside of their typical day-to-day job. Bad idea!
The average millionaire generates income from seven different sources!
Sure, you want to increase your paycheck, which you can do by adding more value to your employer. But you also want to increase the quantity and quality of your streams of income.
The stronger your income streams, the more financially free you’ll be.
Here are a few things to consider when setting goals to boost your income:
- How can you add more value to your employer and warrant a pay increase? Can you take on more responsibilities, hold trainings, increase sales, decrease costs, or provide any other benefit that could lead to a pay increase?
- How can you deploy your capital more effectively to increase your income? Maybe you’re interested in buying real estate, investing in small businesses, flipping products on Amazon, or selling unused goods in your own home.
- How could you monetize your skills? Maybe you’re a good cook, a writer, or a teacher. Could you sell the goods you bake or act as a personal chef? Could you freelance write or start your own blog? Could you start tutoring others on Skype or in person? There’s plenty of ways to monetize your skills. Get creative and think of ways you can produce income by simply doing what you’re already good at.
- What side hustles could you do to generate extra money? Maybe you’d be interested driving for Uber, holding a yard sale, renting a room on Airbnb, managing social media accounts for small businesses, or walking dogs for busy professionals. The amount of side hustles you could pursue are limited only by your ambition.
Set a goal to boost your income, strengthen your income streams, and secure more financial freedom for your family.
How much income will you generate this year?! Get excited about it and make it happen!
#2. What Do You Want Your Net Worth To Be By the End Of the Year?
Your net worth (assets minus liabilities) is one of the greatest measurements of your financial health. It gives you a good indication of how much you save and invest compared to how much debt you owe.
If your net worth is low, you’re either not investing enough or you’re taking on too much debt—either way, you aren’t financially healthy.
To increase your net worth you must invest in assets, pay off debt, or a combination of both. As we discussed above, if you increase your income but fail to invest additional money or pay down debt, you won’t be any more financially free than you were before.
Increase Your Net Worth By Acquiring Assets
Here are some of my favorite investment vehicles to increase my net worth:
- Real Estate. Invested in properties that generate positive cash flow after accruing for maintenance, management, capital expenditures, vacancies, and other expenses.
- 401(k) Plan. Funds invested in a combination of stocks and bonds through index funds.
- Individual Retirement Accounts (IRA). Funds invested in a combination of stocks and bonds through index funds or exchange traded funds.
- Health Savings Accounts (HSA). Let the funds accumulate without pulling anything out for medical expenses until later on in retirement life.
- Taxable Brokerage Account. Generally used for opportunistic investments and funded after other vehicles have been maxed out.
For more details, check out 5 Of The Best Ways To Save For Retirement: The Pros & Cons Of Each Investment Option for more details regarding each of these investment vehicles.
How many assets are you going to acquire this year?!
Increase Your Net Worth By Paying Off Debt
In addition to acquiring assets, you should also focus on paying down debt.
2 Debt Pay Down Strategies
There are two general strategies for paying off your debt early. The first is to focus on paying off the debt with the highest interest rate first and then working towards your lower rate debts. The second is to pay off the smallest debt balances first and then progress towards your higher balances.
Both strategies produce similar savings, but they work best for different people. From a math perspective, you normally save more when you pay off debts with the higher rates first. However, many people have produced better results by focusing on the smaller debt balances first and then snowballing the extra money into the higher balances, because of the motivation they get from seeing their progress.
Both strategies work. If you’re more worried about the motivation to keep going, focus on snowballing with the lower balances first. If you’re more concerned with savings, focus on the higher rate date first.
Regardless of whatever strategy you use, make sure you stick to a plan and make it happen. Debt cripples your financial freedom and makes it nearly impossible achieve.
Set a goal today to pay down your debt! Make it specific. Determine the balance you want per loan by the end of the year and review your goal often to turn it into a reality.
How low are your debt balances going to be by the end of the year?
#3. How Much Will You Donate to Charitable Causes?
I’ve said it before—donating generously to charitable causes you believe in is one of the best ways to bring more meaning into your life.
Increasing your income, boosting your net worth, and pursuing financial freedom is about so much more than money. It’s about making your life and the lives of those around you better.
We strive to succeed financially so we can create a better world.
And as an added bonus, when we give and bless others, we are blessed extraordinarily in return. I’ve always said that giving is the best investment I know of.
How much will you give this year?!
#4. How Will You Reward Your Financial Discipline?
Achieving big financial goals isn’t easy. It’s not supposed to be.
But when we do hit our targets, we want to reward ourselves and those whom helped along the journey.
How are you going to reward your family after you pay down your debt? Are you going to take a trip or go out for sundaes?
What about when you hit your income target? Acquire your first rental property? Max out an IRA?
How will you reward your financial discipline to achieve your financial goals?
Conclusion. 4 Financial Goals You Should Set and Accomplish This Year
This time of year provides a great opportunity for each of us to evaluate our life and ensure we’re designing and living the life we want rather than the one that’s been dealt to us.
Setting and accomplishing goals helps us live that life. And since money is an integral part of life, we must learn how to master it in order to get to most out of our life. We should set financial goals to increase our income, boost our net worth, and donate generously to charity. In addition, we should reward ourselves when we hit our objectives.
Remember, no matter your situation, financial freedom is possible for you. Think big. Dream Big. Go Big. It’s your life, make it happen.
Set a goal of how much income you’ll generate. Set a goal of how many assets you’ll acquire. Set a goal of how low your debt balances will be. Set a goal to reward yourself.
Review and monitor your progress often. Stay committed. Get the most out of your life. Write your own story!
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Please comment! Please let me know what you think—what you liked, what you didn’t, any questions you have, or future topics you would like to see discussed. I want this to be about YOUR financial freedom! I want to provide answers to what YOU need help with!