Practical financial strategies for 2025 start with self-assessment to identify habits.
Q: As our kids have grown up, we’ve started involving them in our annual short-term financial goals. For example, this year we all decided to make more meals at home so we could save money for a long weekend at an indoor water park. The kids loved it and are now excited about saving for a trip to Disneyland. They’ve even drawn a thermometer to track our savings progress and are brainstorming ways they can contribute. Hearing their discussions is both rewarding and enlightening. What they don’t know is that we have some leftover money from our recent trip, and my wife and I have decided to use it to jump-start our savings for the next one, aiming to take the trip in 2025 instead of 2026. It’s an ambitious goal, but we’re up for the challenge. They were bragging to their cousins about what we’re doing and now my brother’s family wants to try setting a family goal too. We’ve shared what we do to achieve our goals, but do you have general suggestions on making the journey toward financial goals easier? ~Ben
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A: As the hustle and bustle of the Christmas season winds down, the lull before New Year’s offers time to pause, reflect, and reset both individually and as a family. It’s the perfect time to look back at the past year’s highs and lows, celebrate the victories, learn from the challenges, and set your sights on new goals and aspirations for the upcoming year. You may want to evaluate personal growth, career or educational achievements, relationships, financial standing, and your well-being. It’s a moment to acknowledge our accomplishments, express gratitude, and make peace with any setbacks; after all, it was a challenging year financially for many Canadians. More importantly, the time for reflection is a chance to envision the future we desire and set clear, actionable goals to make that vision a reality.
With that in mind, here are practical ways to utilize this reflective period to evaluate your finances effectively and start the new year with a renewed sense of purpose and direction.
Prepare for your transition
Whether you want to make significant changes or simply tweak a few aspects of your money habits, preparation is key because transitioning to new money habits isn’t just about the how, but understanding the why behind the changes you want to make. Planning for this transition is essential because it lays the foundation for sustainable financial behaviour. Without a plan, it’s easy to fall back into old habits or make impulsive decisions that could derail your progress.
A thoughtful plan provides a road map, helping you navigate potential challenges and stay committed to your goals. It allows you to set clear priorities, allocate resources effectively, and measure your progress. Ultimately, planning ensures that your financial changes are not just temporary adjustments, but lasting improvements that enhance your financial well-being.
Identify the changes you want to make
The best way to identify changes you may want to make is to conduct a thorough self-assessment. Reflect on your spending patterns, saving practices, and overall financial health. Look at your bank account and credit card statements and track where your money goes each month. Use a spreadsheet or notepad to list your spending categories, and if you have any receipts, break your spending down even more specifically.
For instance, if you shopped at a large pharmacy that also sells grocery items, home electronics, household goods and personal care products, looking at a charge on your credit card statement or debit from your bank account for the total amount you spent at the pharmacy might not help you identify where your money is actually going. As you review your spending, leave room on your tracker to record spending as it happens, rather than retroactively. This will give you a clearer understanding of your spending habits and highlight areas for improvement.
During your self-assessment, identify any counterproductive habits, such as impulse purchases, or those that neglect your need for savings. Consider your financial goals and the gaps between your current behaviour and where you want to be. Ask yourself if you are spending too much on non-essentials or not saving enough for emergencies. Pinpointing these areas allows you to focus on specific, actionable changes that align with your long-term financial objectives. This introspection is crucial for setting realistic and effective goals.
Set specific goals
When setting financial goals, it’s beneficial to categorize them into short, medium, and long-term time frames. Short-term goals are those you can achieve within about 12 to 18 months, such as paying off a small bill or saving for a vacation. Medium-term goals span two to five years and might include buying a car or saving for a wedding. Long-term goals are aimed at the distant future, typically over five years, and often involve objectives like retirement, purchasing a home, or achieving financial independence. This approach helps structure your financial planning and keeps you focused on both immediate and future goals.
Be SMART with your goal setting
Regardless of the goals you’re setting, it’s essential to make them SMART. This means being specific and clearly defining what you want to achieve. Ensure that your goals are measurable so you can track your progress effectively. It’s also crucial that your goals are realistic, attainable, and achievable. For instance, with a medium-term goal like buying a car, saving for a substantial down payment, rather than the full price, might be more feasible given your budget, timeline, and the overall cost of the vehicle you want to purchase.
Your goals should be relevant and align with your personal values and long-term objectives. However, without a clear time frame, goals remain mere wishes or dreams. Setting time-bound goals with deadlines allows you to evaluate your progress periodically. This helps you determine if you’re on track or if adjustments are needed to achieve your goals successfully.
Take practical steps to implement changes for your money habits
Implementing changes to your money habits requires a blend of strategy, discipline, and consistency. Well thought out practical steps can make all the difference. For instance, automating your savings can help keep it out of sight and out of mind. Using your online banking, set up automatic transfers from your chequing account to your savings account on each payday. This way, the money is transferred before you even have the chance to spend it.
When aiming to save money, one effective strategy is to reduce unnecessary spending. Start by cancelling or pausing any subscriptions or memberships that you don’t fully utilize. Additionally, look for ways to control the growth of subscriptions, such as those needing cloud storage. For instance, you can delete files you no longer need or transfer them to an external hard drive. These actions help to manage and cap subscriptions that might otherwise continue to grow unchecked.
To combat impulsive buying, implement a 24-hour rule before making any non-essential purchase. Save dining out or getting takeout for special occasions by creating meal plans that cover all meals and snacks for the week. Encourage each member of your household to contribute to spending less. Small changes are easier to make than big changes and many smaller changes collectively make a significant impact on successfully achieving your financial goals.
The bottom line on planning your goals for 2025
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