It’s that time of year again: New Year’s resolution time.
The problem is that without a clear plan to change behaviors, many will fall short of reaching their goals. But all is not lost. You can benefit from creating a resolution for yourself, and you can stick to your goal. Here are some tips for success:
Be specific. It’s easy to fall short with a general goal, like “lose weight” or “save more.” However, you can maintain focus with a specific goal, like “lose 10 pounds by March” or “save $500 in an emergency fund by June.” These goals are measureable, and you can create smaller mile-marker goals to track your progress and adjust your behavior every few weeks.
Be realistic. Don’t overestimate your ability to achieve a goal. It’s easy to get excited and create a lofty resolution that sounds great. But if you create a goal that’s too far out of reach, you’ll become discouraged and likely to just nix it. If, for instance, you want to get yourself out of debt, choose an area of focus, like one credit card. Create a plan to pay that down. When you achieve that one realistic goal, you can move on to the next realistic goal.
Have a plan. Saying you want to lose weight and actually creating a plan to do it are vastly different. For instance, if your goal is to lose weight, you could start your plan with a pantry clean-out. The next step could be scheduling time on the calendar for extra exercise so you’ll always remember and your family can support your efforts. The plan doesn’t need to be overly detailed, but it should offer enough information for you to easily move from task to task.
If you’d like to include a resolution related to your retirement readiness, here are a few actionable items you can use. Add your own due dates.
Figure out how much money you’ll need to save to reach your goals. Use one, or several, of the retirement calculators available online. They’ll help you determine your replacement ratio, which is the amount of your current income you’ll need to replace using your retirement savings when you stop receiving a paycheck.
Set up your contribution rate. In addition to helping you determine your overall goal, some online retirement calculators can tell you how much money you should contribute to a retirement plan each pay period to reach that goal. If the contribution rate seems too high, contribute enough to receive 100 percent of any company match available to you, and then set up a system to increase your contribution percentage at least once per year. Some plans will allow you to increase your contribution rate in automatic increments. If your plan doesn’t offer auto-increases, schedule a reminder on your calendar. Use a memorable date, like your birthday or an anniversary date.
Create an appropriate asset allocation mix. Go back to the Internet and look for asset allocation calculators. These tools will help you determine an appropriate mix of stocks, bonds, and cash equivalent investments for your portfolio, based on your risk tolerance and timeline for saving. With your asset allocation mix in mind, choose funds from your retirement plan that fall into the appropriate asset class categories. Another option is to use a target-date fund offered through your plan. Be certain to familiarize yourself with the expense ratios associated with any funds you’re considering.
Good luck, and Happy New Year!
Scott Holsopple is the president and CEO of Smart401k, offering easy-to-use, cost-effective 401(k) advice and solutions for the everyday investor. His advice has been featured on various news outlets, including FOX Business, USA Today and The Wall Street Journal. Keep tabs on Scott on Twitter and Facebook.