How to Set and Achieve Realistic Financial Goals

It’s that aspirational time of year, and although we’re all (me included) in the full throes of our annual consumption seizure, we’re probably also starting to think about what we’d like to accomplish in next year.

Many of you are familiar with the S.M.A.R.T. acronym for goal setting: Sumptuous, Meaty, Attainable, Roasted, Tantalizing.

Okay, obviously that’s not the correct acronym, but I don’t remember certain parts of it, I’m a little hungry, and all I want to talk about today is attainable anyway.

As I think about my annual financial goals, I’m leaning toward an “underachieving to achieve” mindset. In other words, I’m not setting “stretch” goals. In my case, a stretch goal would be to pay off my student loan and my residential lot loan (combined remaining balances of $18,000 and change). Could it happen in the next year? Yeah, it might. I might even give myself a 51% chance of creating enough extra income to knock them both out in the coming year.

But I’d rather set myself up for the easier-but-not-much-less-significant win of knocking out the full balance on the residential lot loan by the end of the year.

Way I see it, if you’re going to set a goal, you might as well have a clear idea of exactly how you’re going to make it happen.

Here’s how it breaks down for the residential lot loan:

Current balance: $13,000 (give or take)

• Base Payment: $163/mo (around $100/mo goes to principal).
• Current balance in Debt Snowball Category: $1,747.54 (Just need to send off the check.)
• Expected Tax Refund: $3,000 (I actually expect more because of an accidental overpayment of estimated taxes early in the year).
• Ongoing snowball payment: $300/mo (fits inside the current budget).

Applying all those payments throughout the year leaves a loan balance of just over $3,450, or $288 per month. Allowing for taxes and charitable contributions, I’d need to earn an extra $450 per month to make $288 available for debt elimination.

I already have one freelance client at $150/mo; she’s been happy with my work and has reached out to several of her professional contacts to help me secure my next couple of clients.

In other words, I have plenty of momentum to zero out the balance on the residential lot. It’s really “my game to lose.” And that’s how I want to set my financial goals for next year.

What’s your big financial goal for the year, and how confident do you feel about it?