Dream with me for a moment—let’s say that in 2023, you were guaranteed the chance to achieve a huge milestone in your life. What milestone would you choose? Would you marry the love of your life and have a dream wedding? Maybe you would buy a new house or even send yourself back to school to study something you love?
Good news—you don’t have to dream forever. 2023 could be the year you lay the foundations to get after your next significant milestone. And it all starts with setting SMART financial goals. So here’s how you can set yourself up to crush 2023 by adding SMART new year goals to your financial resolutions list.
The psychology behind successful goal setting (and why new year goals sometimes go wrong)
If you’ve tried and failed to achieve a slew of NYE resolutions for the last few years, you may wonder if goal setting is worth the trouble. First of all, join the club, because I’ve told myself every year that this is the year I’m getting back into incredible shape, paying off my student loan debt, and finally writing my novel.
But somehow, none of those things have happened, so what gives?
It comes down to the psychology of goal setting and motivation. If you know how to approach goal setting methodically and strategically, then you’ll be more likely to find success. At least, that’s what motivational psychologists have told us for the last thirty years.
In the early 1990s, motivational leaders often quoted a famous 1953 study by Yale University. The study concluded that people who wrote down their goals were more likely to achieve them.
There was just one little problem with this study—someone forgot to write down their goal to conduct research because it never actually happened. The whole study was debunked in 1996 as an academic urban legend!
That’s when scientists got serious and put together an actual study that got even more granular about the psychology of goal setting. In 2015, researchers studied five different kinds of goal-setting styles. Here’s what they learned:
- People asked to think about a four-week goal had a 43% success rate of achievement.
- People asked to write down their big goal plus actions that would help achieve it and share their plan with a friend had a 62% success rate.
- People who did everything the middle group did, plus sent a weekly progress report to their friend, had the highest rate of success, at 76%.
So what does that mean for us as we head into 2023? It means that setting formal, measurable goals lead to higher success rates. Enter the best kind of goal-setting approach around—SMART goals.
How do SMART goals work?
SMART stands for Specific, Measurable, Achievable, Relevant, and Time-Bound. SMART goals are designed to help you break down larger objectives into actionable steps that can be tracked and measured over a given period of time. And if you share your SMART goal with a friend with weekly updates on how you’re progressing, nothing can stop you from achieving your dreams.
How do you set SMART financial goals?
You may want to grab your journal or open up the notes app on your phone—here are some reflection questions to jumpstart your goal-setting process.
Make them specific
What exactly do you want to achieve? Be as specific as possible. You may want to save a certain amount of money, pay off debt, or increase your net worth by a certain percentage. If you have several goals but aren’t sure where to start, we suggest the following:
- Paying off high-interest debt
- Building a solid savings with several months’ worth of living expenses
- Investing your money for long-term gains that help you prepare for retirement
- Creating savings for large purchases (homes, cars, tuition, wedding, etc.)
Find a way to measure your progress.
How will you measure your progress? This could be a numerical measurement such as the amount of money saved or the number of debts paid off. Consider how you’ll track progress, such as by using an excel spreadsheet or an app.
Be realistic–keep them achievable.
Is this goal attainable for you? Make sure your SMART financial goals are realistic and within reach. Break down lofty goals (like buying a house or paying off debt) into smaller milestones. You can always build on your SMART goals as you find success along the way.
Pick goals relevant to your larger life milestones.
How does this SMART financial goal relate to your overall objectives? Your SMART goal should match your larger life goals so it feels important to you. For example, if you want to purchase a new home, you might first start with a plan to pay off a high-interest credit card. Then, you can add the goal of building a savings account for a down payment.
Keep your goal time-bound.
What is the timeline for achieving this SMART goal? Set a deadline and then break it into smaller, more achievable tasks. Keep your timelines short (a matter of days or up to 3-4 weeks) to increase your chance of success.
Add accountability to boost your chance of success.
Finances are deeply personal for most of us, so you might get the ick when you think about sharing your financial goals with someone else. If you have a partner or close friend you feel comfortable reporting to, then awesome! Loop them into your SMART financial goal plans for 2023.
If you prefer to keep your financial goals to yourself, there are plenty of tools you can use to track your progress along the way. Julep is a financial wellness app with psychology-based goal-tracking features that will keep you motivated and on track in 2023—all while protecting your privacy along the way. No matter how you set SMART financial goals for the coming year, take it one step at a time and celebrate your wins along the way.
Julep is not a financial institution, financial advisor, or credit repair company, and does not provide credit repair services of any kind. The information provided is for general educational and reference purposes only. The information is not intended to provide legal, tax, or financial advice. We do not propose any guarantee that the information provided will repair or improve your financial profile. Consult the services of a competent licensed professional when You need financial assistance.