NerdWallet's Smart Money Podcast - How to Set Goals You Can Actually Achieve

Episode Date: January 1, 2024

Take your New Year’s Resolutions to the next level by establishing SMARTR financial goals that you can achieve in 2024. Wondering how to set financial goals you’ll actually follow through on? Have questions about how to avoid end-of-year financial regrets? The Nerds have you covered! Explore strategies for setting realistic goals in 2024 with hosts Sean Pyles and Elizabeth Renter as they discuss “regrets and resolutions” and share ideas to help you take your 2023 experiences in stride, learn from them, and use them as stepping stones for creating a stable financial future.  They explore some of the financial regrets that haunted many Americans in 2023, including overspending and saving too little, and provide tips for avoiding common financial regrets, such as taking on too much credit card debt. Sean also explains his SMARTR framework for setting and achieving goals, which you can apply to your New Year’s Resolutions or any other goal you have in 2024. In their conversation, the Nerds discuss: SMARTR financial goal setting, financial regrets, setting realistic goals, budgeting, saving, credit card debt, large expenses, New Year’s resolutions, goal setting framework, emergency funds, and retirement savings. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend.

Happy New Year, dear listener. I hope you're recovering from any festivities that helped you ring in 2024. Did you make any resolutions? Here at Smart Money, we're not really into those, but goals are okay. And so is looking back at the mistakes you made last year, so you hopefully don't make them again.

I like to think of my financial goals similarly to how I think about my health goals. I can't do this all or nothing stuff. It's totally unsustainable and it creates this very unhealthy pattern of extreme restriction and then indulgence, right? So not spending anything on takeout is very unrealistic for me. And I know that just like totally giving up pizza. Welcome to NerdWallet's Smart Money Podcast. I'm Sean Piles. And I'm Elizabeth Renter. This episode kicks off our nerdy deep dive into your money in 2024. In this special series throughout the month,

we'll be looking at everything from investing to the housing market to how to manage credit as you move through this year. Elizabeth, any money hopes and dreams for 2024? Well, I am planning a lot of travel in the coming year. So I suppose the money hopes and dreams of that would be finding the right flights and hotels to do it in style without overpaying. I'm actually planning the strategic opening of a new credit card account to help make this happen. Very nerdy, Elizabeth. Well, I'm with you. I'd say my main financial hopes and dreams are to finish up school to become a certified financial planner professional. Still about 10 months to go on that. And as ever, I'm trying to tame the internal beast that is my desire for

the impulse purchase. Well, congrats in advance on the CFP, Sean. I'm actually finishing grad school this year, so we will absolutely have to toast to achieving these goals when we get there. Absolutely, because I am sure we will need it then. A hundred percent, Sean. You know, I like that we're talking about hopes and dreams here instead of resolutions. New Year's resolutions seem to be such an overdone hoopla at the beginning of the year. And it does give you some early motivation, but that motivation fizzles out by like March. So, you know, we start each year with these huge new year, new me resolutions, and then life or the economy gets in the way and falling short feels really, really bad. Life

happens to all of us and we really shouldn't beat ourselves up with these regrets. But maybe instead look at what went wrong and how to adjust moving forward on any schedule, not just the calendar year. Totally. I mean, I'm all for goal setting and having a well-planned approach for accomplishing goals because in fact, goal setting is one of the most important things that we need to do in our financial lives, because money is just a means to an end. And if we don't know what we want from our money or how we will accomplish it, making meaningful progress in life can be quite difficult. But that said, the resolution framing can be overly rigid or lead people to make unrealistic goals that lead to self-flagellation when you don't accomplish them.

Yes, for sure, Sean. Listen, goals are my love language. My love language to me. When I whisper sweet nothings to myself, it seriously often involves big goals. Whatever helps you accomplish them, I suppose. But, you know, practicing self-care and self-love is important. And we are going to follow that advice today, although we are going to look back at some regrets, but only in the way that we can learn from them going forward. And we're going to call it regrets and resolutions because that just scratches the alliteration itch in my brain. But really, it's all about goals this episode. All right. Well, listener, we want to hear what you think, too. Send us your financial hopes and dreams for 2024. Leave us a voicemail or text the

nerd hotline at 901-730-6373. That's 901-730-NERD or email a voice memo to podcast at nerdwallet.com. Stay with us. We're back in just a moment with some ways to plan a good year in money. So, Elizabeth, you wrote a great piece for NerdWallet about how money regrets from 2023 can pave the way for goals in 2024. I'm curious if you have any money regrets from last year. You know, Sean, I wish I ended the year with more in the bank, but I think that's pretty true every year. I can't really point to one thing and say I wish I would have done it differently. So maybe no true regrets. How about you? No regerts. Well, I regret that I have to pay my

student loans again. But on the whole, I'm feeling pretty good about how I managed my finances last year. Although I guess the real test will be when I go to file my taxes. For sure. Well, interestingly, about two-thirds of Americans do have some money regrets from 2023. At NerdWallet, we commissioned a survey with the Harris Poll towards the end of last year. And one silver lining of all of those regrets is that 75% of those people say they're going to use them to do better this year. And Sean, we had a lot of headwinds to contend with last year. Yeah, we started off 2023 with high inflation. And then to combat that, the Fed kept hiking interest rates. And throughout the year, everything from credit cards to mortgages became more expensive. So Elizabeth, let's talk about some of those regrets people had. What is the biggest one? Americans wish they had saved more in 2023. Almost one-fourth regret not saving enough for their financial goals, and 21% regret not saving more for emergencies.

You know, that makes sense. Americans' personal savings rate, or the amount of disposable income that we save, went through the roof early in the pandemic, spiking as high as 32% in April 2020, but we're saving a lot less now. In October 2023, the personal savings rate was a lot lower at nearly 4%. So is it possible to say how likely it is that people will be able to save more money this year? Well, it depends. As you said, going into 2023, some households still had that excess savings from pandemic stimulus payments and student loan forbearances. So if you're coming into 2024 with less in the bank and higher debt payments, it could be more difficult. That said, inflation is moderating. So the costs that were rising at a pretty considerable clip one year ago have slowed and wages in some cases have caught up.

OK, well, let's give a few tips for fixing this regret. Sure. Well, I'd like to focus the biggest piece of advice on that one in five Americans who regret not saving for emergencies. That's definitely where you should start. Ideally, you'll have several months' worth of living expenses set aside in case of emergencies, but that can be a very tall order, especially if you're starting from zero.

So start small. Aim for a few hundred dollars, especially if you're starting from zero. So start small. Aim for a few hundred dollars and then up it to 500 and then 1,000 and so on. And whether you're saving for emergencies or a home down payment, set specific benchmarks to help you get there. For example, that could mean setting up a direct deposit into a savings account for $100 out of every paycheck with the goal of having $1,200 by mid-year. So you're setting specific dollar amounts and timelines, and it's automated. Love it. And we'll talk later on about how important it is to take small steps when you're trying to achieve big goals like building a solid emergency fund. So Elizabeth, what is next on the list of Americans' money regrets from 2023? Overspending.

22% of Americans regret overspending on entertainment in 2023. So that includes dining out, going out for drinks, going to the movies, and that sort of thing. Also, about 1 in 10 regret overspending on travel, and 11% regret overspending on an event like a wedding or a graduation party. We had a lot of big events in 2023. I mean, between Taylor Swift's Heiress Tour and Beyonce's Renaissance Tour, there were some expensive events last year. Although I'd bet that folks who got tickets to those concerts do not regret spending a single penny on those experiences. Elizabeth, did you see any expensive concerts last year? Unfortunately, no. I currently live in a really small town with exactly zero venues.

So had I gone to a concert, it definitely would have cost a pretty penny. What about you, Sean? Well, I did see Diana Ross when she came to town. But to be honest, I actually have no idea how much those tickets were because my partner bought them. I kind of just wanted to brag about seeing the boss on tour. But anyway, I guess the overspending regret isn't totally surprising. Part of the reason people can't save is that they're potentially overspending. Yeah, for sure, Sean. Those things often go hand in hand, especially when prices are rising. And frankly, if you were overspending last year,

you were part of the reason the economy kept humming along. So thank you. But maybe don't do it as much this year. So Elizabeth, any ideas to make that happen or more to the point not happen? Well, Sean, the answer to this regret is the very unsexy panacea, a budget. Listen, some people love a budget. They have spreadsheets outlining their spending limits and where all of their money is going. Here's looking at you, nerds. But you don't have to go that far if you know that's unrealistic for you. Instead, set a budget for the things you need budgeting help on. You know, if you overspend on dining out, set a weekly limit for that. If you overspend on travel, set an annual travel budget. Sometimes the idea of a capital B budget is super off-putting, but you can benefit from these very specific targeted spending limits too.

Yeah, people's eyes, or I guess in the case of a podcast, people's ears, can glaze over when you talk about budgets, but I like to think of them more as a conversation that you're having with your finances. You are figuring out what money you have to work with, where you're going to allocate it, and determining how to live your values through your daily spending. And I find that really empowering personally. Sean, as a nerd, you would. That totally tracks. Yes, fair enough. Well, let's move on to regret number three.

In 2023, 16% of Americans regret not reducing or paying off their credit card debt, and 16% regret taking on too much credit card debt. And this is just perennial. I mean, this is something people struggle with and come to regret year in and year out. What would be your top things to keep in mind in 2024 if you're struggling with this? Well, you're absolutely right, Sean. But we did see credit card debt shrink during 2020 and 2021. So as we spent down that excess savings and embarked on revenge travel in 2023, we may have seen folks go back to relying on cards the way that they did before the pandemic. And now we have high interest to go with it. on cards the way that they did before the pandemic. And now we have high interest to go with it. So if you're taking on more debt, it could be more

difficult to pay it off. So first off, if you're hoping to pay down debt, I'd refer back to my earlier suggestion about making very clear targets, specific amounts and timelines. But if you've begun using credit cards in lieu of an emergency fund, the problem could be bigger. In that case, you may want to look into debt relief options like consolidation or debt management to help identify resources and formulate a plan to get your finances back on track. Well, now that we've dealt with regret, how about some resolutions or let's call them goals, even though I still love the alliteration of regrets and resolutions. Elizabeth, you mentioned earlier in the show that you don't

really like to make resolutions and I don't really either, frankly. Can you talk a bit about why, especially in the realm of personal finance? Yes. So I like to think of my financial goals similarly to how I think about my health goals. I can't do this all or nothing stuff. It's totally unsustainable and it creates this very unhealthy pattern of extreme restriction and then indulgence, right? So not spending anything on takeout is very unrealistic for me. And I know that just like totally giving up pizza. If I restrict myself this way, I won't just like fall off the

wagon. I will absolutely crash the wagon and burn down the entire village. Like I'll celebrate not having takeout for a month by splurging on takeout that costs twice as much, right? One extreme to the other. Right, exactly. And then you're dealing with the regret of all of it too. So I try to find balance between what's going to get me closer to my long term objectives while not making my life miserable. Yes. I am also all about going slow and steady while giving myself room to just be human and mess up every once in a while. Also, Elizabeth, something that our listeners might not know is that you're a competitive power lifter. So you know a thing or two about sticking to ambitious health goals. I try. I try. Yes. Within reason. So you're not lifting too much

weight, hopefully injuring yourself. But going back to the resolution versus goal thing, I think the time box of a resolution as something that you focus on for only one year or realistically, maybe a single month before you totally forget about it, can be really limiting when it comes to financial goals. The resolution framing can lead people to expect huge and dramatic changes in their finances a lot faster than is actually possible. The truth is that it can take years to build up that solid emergency fund, not to mention how long it takes to save for retirement. But that is not to say that you can't take steps today or tomorrow and the next day to better your finances.

In fact, those steps that you do take today are in all likelihood the only things that will get you there. You're absolutely right, Sean. Those incremental changes and growth really do build up over time, whether we're talking about money or powerlifting. You just keep plugging away and accept sometimes that that path is not going to be linear. Yeah, for sure. Well, we kind of went through some advice for not repeating the regrets we might have had in 2023. How do you think about that as different from goal setting? You know, from my perspective, regrets and setbacks are really just

things that happen on your way to a goal. You're going to have periods of progress and periods that don't go quite like you wanted. Sometimes those setbacks are you're doing entirely and other times they're not, but they generally don't upend your ability to attain your goals altogether, right? Like maybe I had to divert some of my monthly savings towards an unexpected car repair, or maybe I went over my travel budget. Does that mean I won't hit my savings or spending goals? Not necessarily.

It might set them back by a few months, but it doesn't quash my goals. They're still attainable. Yeah, it's all about giving yourself grace and focusing on that long-term. All right, well, let's suggest a few financial goals that people could endeavor to achieve over the coming year. What would be your first suggestion? Well, Sean, I'm going to give the mom advice that we probably all need to hear,

and that is try your best. Set a goal to just try your best. But don't just give that lip service, right? Really try your best. And the thing I like about this goal is that it looks entirely different for different people. For some, setting aside $50 a month for six months into a brand new emergency fund will be their baseline goal. And for others, it might be bumping up their retirement contributions to, I don't know, 12% of their salary. In either case, you could hit a tough month and have to adapt. But don't, in that situation, just throw up your hands and exclaim, yeah, all bets are off. I guess I'll try again next year, right?

Keep going. Just keep doing the best you can. What about you, Sean? Well, I touched on this earlier, but I'd recommend people spend time getting more acquainted with their relationship between the spending and their values. It can be easy to just spend in a way that's not super thoughtful or not aligned with the values that we hope to embody each day. So going back to that budget conversation you're having with yourself, think about what you want

from your life and what kind of world you want to live in. And then ask yourself if you are directing your money accordingly. That's a question that I try to ask myself a lot. And the answer isn't always going to be yes, but it's something to be mindful of. Okay, how about one more? Well, I like what you just said, Sean. You know, being more mindful of how you spend can help keep you from those overspending regrets.

And building on that, I'd suggest taking steps to literally slow down when you're spending. If you just loaded up a cart at an online retailer, make a practice or a goal of just walking away and coming back tomorrow. Give it a day before you check out. I do this and frequently find

I've mindlessly thrown things in the cart that I really don't wanna spend my money on. Yeah, I love that. And as a person of the ADHD experience, I can sometimes get hyper fixated on a purchase that I wanna make. But can sometimes get hyper fixated on a purchase that I want to make. But if I build in that buffer of a day or two, I'll find that I actually don't want

that thing after all. And if I don't buy it, that means I have more money for things I actually do care about. So as we make these suggestions for resolutions slash goals, how about we provide some advice for how to actually make them happen? What do you do on that front? Any personal tips, Elizabeth? Yeah, well, for the big goals, I tell somebody I have a seriously big fear of looking like I fell short. And by telling someone what I'm trying to achieve, I build in that accountability. Sean, I know accomplishing goals is something of a pet topic of yours. So what about you? Yes, I do also love an accountability partner.

I've made my life partner, Garrett, my accountability partner for my CFP coursework. I'll tell him that I'm going to do X assignment. And even if I don't feel like doing it, just knowing that I told him that I would do it can push me to actually get that work done and do it in a way that's meaningful. So I'm learning what I need to learn. Exactly, Sean. So you want to give us the rundown of how to actually accomplish goals this year?

Yes, I would love to. So we use the SMART goal-setting framework here at SMART Money, perhaps not totally surprising. And I add my own twist by making them SMARTER goals. So for those who are not familiar, SMART is an acronym for Specific, Measurable, Attainable, Relevant, and Time-bound. And the extra R that I add at the end is for Rewarded, and I'll explain why in a little bit. I'm excited to hear this, Sean. So walk us through

how it all works. Okay, starting with the S, Specific, make your goal very clear and tangible. For example, maybe you have a goal of investing more this year. Okay, great. But what does that really mean? Are you going to max out your IRA or 401k or get set up with a robo-advisor account? The more precisely you can envision your goal, the easier it will be to map out the path to get there. That makes perfect sense. You can't accomplish a goal if you don't know what it is. Yeah, exactly. So now on to the M, measurable. You need a way to quantify your goals and track the progress that you're making. So to continue that investing example, if you want to max out your IRA, the maximum you can contribute in 2024 is $7,000 or $7,500 if you're 50 and older. Figure out how much you would need to contribute each month to hit that goal. So quick mental math, totally not using a calculator here. If you want to hit that $7,000 amount, you need to contribute about $583 each month and then

track your progress throughout the year, maybe on a spreadsheet or in a journal. Yep. Okay. And that brings me to the A in smarter goals attainable for a lot of people contributing $583 a month into a retirement account just is not feasible. So in that case, what's a more affordable option? Look into your monthly income and expenses, that whole budgeting conversation we've been talking about, and see how much you could actually contribute. Maybe it's $200 a month. So you would contribute a total of $2,400 to your IRA over the year, which is still awesome. Very awesome. Okay, Sean, we have the specific, the measurable, the attainable. What about the rest? This is testing my spelling as much as anything.

Yes. So the R and the T stand for relevant and time bound. You want your financial goal to be something that's actually relevant to your life goals, your passions and your values. If you're contributing to a retirement account because you think it's what you should be doing and it's not something you actually care about, you're not really likely to meet that goal. And with time bound, that is when you put a time box on your goal. So to round out this example, if you want to save a certain amount for retirement in the calendar year of 2024, you'd have the monthly steps that you take to meet your annual goal. And at the end of the year, guess what? You did it. Goal accomplished. Yay. Congratulations. But wait, Sean, you mentioned that R, your finishing touch. What's that all about? Yes. I'm so glad you didn't forget that, Elizabeth. The final R is for rewarded. As the child of behavioral psychologists, I'm a big proponent of positive reinforcement and

making the process of accomplishing your goals as enjoyable as possible. Because the more you like doing something, the more likely you are to keep doing it. So build in rewards as you take the small daily or monthly steps towards achieving your goal. I love that idea. So when someone makes that monthly deposit into their IRA, maybe they go out for ice cream or do a shot of tequila, whatever makes them happy. Exactly. Yeah. Just don't go too wild.

You don't want to blow your retirement savings budget on that top shelf tequila. So that is the smarter framework. And it can be really helpful as you accomplish goals over the coming year. But also as you're working away to save for retirement or whatever, I want to encourage you, listener, to give yourself grace if you're not able to fulfill all of those goals this year. Like Elizabeth said, life happens. You might have a big expense one month that sucks up the money you would have put toward

retirement. That's okay. Take a breath, regroup, and just pick up the money you would have put toward retirement, that's okay. Take a breath, regroup, and just pick up the pieces next month. No matter what, just please don't be harsh with yourself. It is simply not worth it. Try your best. That's all you can do. Well said, Sean. Do your best and keep going. You might not see other people struggling towards their goals, but they are. Remember all those Americans who had money regrets last year? This isn't a linear process.

Sometimes things are hard and sometimes they surprise you with how well they go. So what we've learned today is that A, a lot of people have money regrets from 2023. B, you can use those to change habits in 2024. And C, make some smarter goals instead of resolutions when it comes to your finances. I like it, Sean. So what's next for this 2024 look ahead series? Well, Elizabeth, we are going to take a look at what this year might bring in investing. Not that anyone can predict the markets, but that's kind of the point. If you have a well-diversified portfolio and you're investing for the long term, like for retirement, there's no real reason to stress about the ups and downs of the market in the short term.

And yes, in this instance, again, one year is the short term. For now, that's all we have for this episode. Do you have a money question of your own? Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. Also, visit nerdwallet.com slash podcast for more info on this episode. And remember to follow rate and review us wherever you're getting this podcast. This episode was produced by Tess Vigeland and Elizabeth. I helped with editing. Kathy Hinson helped with fact checking. Haley Monahan mixed our audio and a big thank you to nerd wallet editors for all their help. And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general

educational and entertainment purposes and may not apply to your specific circumstances. And with that said, until next time, turn to the nerds.