For most people, 2020 has been a challenging year. From the COVID-19 pandemic to the subsequent recession to the many unprecedented political and cultural events, this year has been one for the history books. While most are hoping that 2021 is nothing like 2020, the reality is that the future is uncertain.

As you think ahead to 2021—and having a clean slate in the new year—financial goals may be your top priority. Here are some tips for making realistic financial goals and reaching them, so that 2021 can be a major “bounce back” year for you.

Basic Rules for Goal Setting

You may have heard of the SMART goal system, but here’s a reminder. Goals should be:

Specific
Measurable
Attainable
Relevant
Time-Bound

We’re focusing on the “A” for attainable, but you will want to keep all of these in mind as you create goals. If you create an attainable goal—meaning that it is realistic and manageable—but you fail to put a time parameter on the goal, then it may not be very effective. Similarly, a goal could be realistic but not very specific. This could mean that you wouldn’t even be able to say with certainty that you completed your goal because it was not clearly defined. You get the idea—just keep this SMART system in mind and make sure each individual goal meets all the criteria.

What makes a goal realistic or “attainable”?

To be a realistic goal, the goal needs to be within reach. However, don’t fall for the temptation of thinking that only easy goals are realistic. It’s actually very important that you set goals that will motivate you, and very easy goals often are not motivating. On the other hand, you do not want to set a goal that is too difficult to complete, because that may not be realistic and could lead to burnout. You are really looking for the sweet spot of something that is challenging but not so difficult that you have a high likelihood of failure. When setting a realistic goal, it may be helpful to do the following:

Ask yourself if this is a relatively small or large goal. Is it short-term or long-term? For larger and long-term goals, you will need to make sub-goals, which are milestones along the way.
Research your proposed goal. Can you find stories or data about other people who have achieved the same goal? If no one has ever accomplished it before, then it may not be realistic.
Assess your starting point. Even if you know a goal is achievable, make sure that it is achievable from your starting point.
Find what motivates you. Motivation is the secret sauce when it comes to goal setting and goal achievement. When you’re motivated, you can do more than when you’re not. Use motivation to set harder goals than you would otherwise, but you also need to find ways to stay motivated as you work toward your goal.

Tips for Financial Goals

There are some specific strategies available that can help you achieve your financial goals. After all, financial goals are some of the most common new year’s resolutions. These include, paying off debt, building an emergency fund, and saving for a specific expense like college or homeownership. Using these strategies can help ensure you don’t fall short of whatever goal you set.

These are not sophisticated strategies by any means, either. Instead, think of them as basic habits you will need to implement in order to maintain financial success and stability

Budget Before, During, and After

We can’t overstate the importance of budgeting. When it comes to achieving your goals, your budget will be the ultimate road map. Hopefully, you already have a budget. If so, that will give you a clear “starting point.” But if not, the important thing is to maintain a budget moving forward.

A good budgeting system will give you a real-time way to check in on how you’re doing. Are you staying within your spending constraints in various categories? Has your income picked up or dropped off? Where do you need to cut back, or where can you put extra funds when your income changes? A good budget holds the answers to all of these questions.

Save as Much as Possible

Many, if not all, financial goals involve saving to different degrees. The more you save, the more flexibility you will have and the more purchase power you will have. Take a critical look now at the categories in your budget to see where you can make cuts. Every extra dollar you save will be an extra dollar toward your financial goals.

Have an Emergency Fund

Building on the previous point, it is important to build an emergency savings fund equal to six months’ expenses or more. You will want to do this as soon as possible, so it may even be your first major financial goal. Given all the economic uncertainty around us, this step can provide much needed stability.

Assess Your Credit

Many goals also involve credit health, directly or indirectly. Having good credit is an important piece of your financial puzzle. Remember that you can review your report for free at annualcreditreport.com. You should do this frequently to track your progress and ensure your reports are accurate.

Have Accountability

It is easier to stick to a plan when you have someone supporting you along the way. Find a trusted relative or friend with whom you can be open about your finances and goals. Ideally, this would be someone who has already achieved the goals you are working on, or who is on a successful financial path themselves.

Good Luck Achieving Your Goals!

Remember to make SMART goals. A major factor is that your goals should be attainable, which means they should be realistic and manageable for you. By implementing some basic financial strategies and habits, you will be well on your way. If you’d like help with your financial goals, particularly with credit or debt, learn more about credit counseling or get started today.

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