Skip to main content

Erik Carter

Did you make New Year’s resolutions this year? Unfortunately, there’s a pretty good chance that any resolution we make won’t be kept. This can be particularly true of financial goals, which can often feel confusing and overwhelming. Here are some steps to help make those financial resolutions into a reality.

1) Set SMART goals.
When we set a vague goal like “save more money” or a seemingly insurmountable one like “pay off all debt,” we’ve already set ourselves down the path to failure. Instead, you want your goal to be SMART: specific, measurable, attainable, realistic, and time-sensitive. Rather than “save more money,” a SMART goal might be to save an extra $5,000 for emergencies by the end of the year.

2) Determine how you’ll invest for each goal.
For goals to be funded within the next 5 years, you’ll want to keep your money somewhere safe like a bank account or money market fund that just earns interest and doesn’t fluctuate in value. That’s because if you invest the money in something more aggressive like stocks, it could lose value and not recover by the time you need the money. The benefit of a higher return is also much less when the money has such a short time to compound.

For longer term goals, it probably makes sense to take some investment risk. Otherwise, you face the risk of having your purchasing power reduced by inflation. A 1% return with 2% inflation is actually losing 1% a year in real terms of what you can buy with that money.

Having even a small percentage in stocks can give you enough growth to at least keep pace with inflation. The exact percentage depends on your comfort with risk. Just keep in mind that your time frame is how long your money might be invested so retirement would be a long-term goal even if you’re retiring in less than 5 years, unless you’re planning to use the money to pay off your mortgage or purchase an immediate annuity.

The more you invest in stocks, the higher your expected return is in the long run. I like to estimate a 6% return for aggressive investors, 5% for moderate, and 4% for conservative. All are below the average long term returns to be on the safe side.

3) Calculate how much you need to save per month.
You can use this Debt Blaster calculator to see how quickly you can pay off debt by making extra payments towards your highest interest balance and then putting those payments towards the next highest interest debt once it’s paid off. For short term saving goals like an emergency fund or a down payment on a home, you can use a relatively simple calculator like this to see how much you need to save per month given a certain inflation rate and return on your savings. For more complex goals, you can use this calculator for retirement and this one for college planning. Just remember to use expected rates of return that match your time frame and risk tolerance.
4) Look for tax-advantaged ways to save.
Some examples are your employer’s retirement plan or an IRA for retirement. Coverdell Education Savings Accounts, 529 plans, and US Government Savings Bonds can all grow tax-free for education expenses. However, there are typically penalties if you withdraw the money for other purposes.

5) Minimize your investment costs.
Within each account, look for the lowest cost options to implement your investment allocation based on your time frame and risk tolerance. Studies have shown that when comparing similar mutual funds, low costs are a much better predictor of future performance than looking at past performance. In particular, index funds that simply track a given market typically have the lowest fees and trading costs so see if they’re available in your account.

6) Automate your saving.
This is the most important step because you can have the perfect goals, the perfect plan, the perfect account, and the perfect investments but they won’t mean anything without actual savings. By automating your savings, you make sure that they take priority vs. saving whatever you have left at the end of the month. You can do this by payroll deduction or automatic transfer from your bank account.

7) Adjust as needed.
Once a year, you’ll want to revisit your goals, re-run your calculations based on your actual investment returns, see if tax laws have changed, and re-balance your portfolio. If your investments are down in value, this is not a reason to sell them but just a natural part of the cyclical nature of investing. Instead, try to see it as an opportunity to purchase more shares at a lower price through your automatic investing and re-balancing.

As you can see, you don’t have to spend hours researching or following the stock market to achieve your financial goals. When you break it down into these relatively simple steps, you may find that it actually requires less time and sacrifice than you thought. Don’t you wish you could say the same about dieting and exercise?

This article was written by Erik Carter from Forbes and was legally licensed by AdvisorStream through the NewsCred publisher network.

Important Disclosure Information

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Dechtman Wealth Management, LLC [“DWM”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from DWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. DWM is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the DWM’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at

Please Note: DWM does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to DWM’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Please Remember: If you are a DWM client, please contact DWM, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently.

Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Join our newsletter

"*" indicates required fields

This field is for validation purposes and should be left unchanged.