Every December, thousands of people—maybe even you—choose a list of resolutions for the new year. Countless others name an annual “word of the year” to guide and focus them. Whatever it looks like, setting goals (including financial goals) helps you prioritize your time, money, and energy. If you’re saving for retirement, you can use your new year’s resolutions to help you reach your retirement goals faster.
Before you jump straight to 2021, take some time to pause and reflect on 2020. We know, it’s been a difficult year for many. But even the lousy years have something to teach us. As 2020 winds down, we invite you to look back at your wins, losses, and lessons throughout the year - both financial and personal. Then set some positive intentions to help you create and reinforce good habits that will benefit you in retirement.
Document Your Wins
Celebrating your wins is closely related to gratitude, and gratitude breeds joy. So, take a moment to pat yourself on the back. Think about the good things you did, learned, or experienced this year. Managed to remain healthy amid COVID-19? That’s already a huge win. But you also deserve kudos for little things like reading more, staying active, or discovering a new hobby.
Next, think about what progress you made towards your financial success in retirement. For example, maybe you were able to put a little extra into your retirement savings portfolio. You took advantage of low mortgage rates and refinanced your home. Or, you converted a traditional IRA to a Roth and saved yourself a bunch on taxes. Yay, you!
To make sure you don’t miss anything, sit down and make a list of all the things you accomplished this year, big or small. Then congratulate yourself for all that you did manage to accomplish in 2020 for yourself and others.
Acknowledge Your Losses
There’s no denying it’s been a tough year. Many of us have faced devastating losses over which we had no control. And that stinks.
When things go wrong, it’s easy to try and pretend everything’s fine. But acknowledging your losses (and your mistakes) is the first step towards letting go and moving on. So, carve out some emotional energy to admit your mistakes and grieve your losses.
Everyone, especially retirees, have sacrificed a great deal when it comes to social interaction. Perhaps you’ve faced feelings of isolation or loneliness. If you’ve lost a friend or family member to COVID-19 this year, it may help to light a candle, say a prayer, or write them a letter.
You’ve got to face the financial side as well. Ask yourself, where did you fall short this year in terms of saving for retirement and managing your money? If you didn’t put as much into your retirement fund as you’d hoped this year, you’re certainly not alone. If you went on a “retail therapy” shopping spree and overspent, we wouldn’t blame you. These things are setbacks, but they do not mean you’re a failure or “bad with money”.
As with your wins, also make a list of your mistakes and losses in 2020. Say to yourself “I made a mistake.” Apologize to others if you need to. Then, move forward with grace and purpose.
Look for the Lessons
You’ve probably heard that moments of adversity are the greatest learning opportunities. If that’s true, we certainly have a lot to learn from the past twelve months. Go back through your list of losses and look for the peaks among the valleys—you may find that something good came out of something “bad”. Or at the very least, you learned a valuable lesson.
Think about it like this: If you’re a foodie, you’ve no doubt missed going out to try new restaurants. On the plus side, maybe cooking at home ended up being a fun activity to do together. Plus, you’ve probably cut your food budget by at least 20%, which you can add to your retirement fund. In the year of making lemonade out of lemons, what lessons will you take away?
Refocus Your Goals for 2021
2020 wasn’t what anyone expected. Knowing what you know now, it might be a good time to reassess your financial goals based on what this year has thrown your way. Look back over your list from each category and use it to help guide your goals.
- Start with your wins. What new or improved habits do you want to continue and build upon in 2021? If you saved an extra $6,000 this year, why not go for $8,000 in 2021?
- What mistakes do you want to avoid making again? What opportunities (financial or otherwise) can you capitalize on?
- If you’re already retired, look at your retirement map and set some goals for fulfillment in 2021.
- If you’re still working but you’re planning to retire soon, ask yourself: what can you do to bring you closer to being retirement-ready?
For more inspiration when setting your financial goals, here are a few examples if you’re planning for retirement:
- Build up an emergency fund with at least four months worth of expenses
- Pay off any debts you may have (set a monthly payment goal to get you there)
- Contribute $6000 (and an additional $1,000 catch-up for age 50+) to an IRA
- Create an estate plan
- Apply for Medicare if you’re turning 65 soon
- Start a side-gig that brings in $500 per month
For more on planning and setting goals for retirement-readiness, get the Essential Retirement Planning Guide.