Framing Financial Goals for 2023


The new year is a perfect time to revisit, reevaluate, and refine your financial resolutions.

Happy senior woman holding smartphone

If you’ve ever made a New Year’s resolution, then you’re probably the type of person who strives to be the best version of themself. Whether a new diet, career goal, or decision to cut back on device time, the new year provides an opportunity to reevaluate priorities and make changes for the better. In the world of personal finance, goal setting can help accomplish major milestones such as buying a home, funding retirement, or starting a new business. Here are a few simple steps to help you achieve your financial goals in 2023 and beyond.


SMART goals

Doug Fabian, Senior Vice President at Mercer Advisors, recommends SMART goal setting: specific, measurable, attainable, relevant, and time-bound. The more specific and measurable, the better. A goal should also be attainable; many resolutions fail because they’re unrealistic. For example, if your goal is to save X amount of money each month, but your budget shows you have only Y amount of disposable income, then you aren’t setting yourself up for success. “Specific” and “measurable” mean that if you want to save money each month, you should look at your budget and track your expenses to determine what is attainable.

Each goal should also be relevant and important to your personal situation. There should be a deep meaning for the things you want to do, like buy a first home or help pay for your child’s education. You’re more likely to accomplish goals that motivate you for personal reasons.

Framing is the process of putting a specific goal in focus—and when it comes to financial goals, time is one of the most important parts of the process. For example, a rate of return is closely aligned with time horizons. If your goal is a 10% rate of return and your time horizon is only one year, you might be setting yourself up for disappointment because returns on short-term instruments (such as CDs, savings accounts, or money market funds) are nowhere near 10%.

It’s too difficult to predict market returns from one year to the next, but we can make assumptions about what to expect in 10 or 20 years by looking at historical returns. Therefore, building wealth with higher rates of return is applicable to long-term rather than short-term goals. On the other hand, paying off a high-interest credit card balance, building an emergency fund, or talking to a financial advisor could be short-term goals. Let’s review the difference between goals that have different time horizons.

Short-term goals (one to two years): Paying off a revolving line of credit, building some emergency savings, or spending less on streaming services, dining out, and other nonessentials can be short-term goals. Also, as you get closer to long-term goals, those turn into short-term goals. Long-term rates of return become less important when the priorities are shorter-term goals and having cash on hand.

Medium-term goals (three to nine years): If your goal is more than a couple of years from becoming reality, you probably want to both save money and seek long-term rates of return. If, for example, you plan to leave the workforce and start a business in seven to nine years, then you might want to have a mix of growth-oriented investments and short-term liquid investments such as money market funds.

Long-term goals (10 years or more): A financially secure retirement is the most important goal for many people. It also has a long-term time horizon, because a retirement can last 20, 30, or even 40 years. (Paying for a college education might also be a long-term goal, but usually involves just four years of expenses.) Since you need income for the entire period, it’s important to earn a reasonable rate of return that outpaces inflation. While past performance doesn’t guarantee future results, history shows that a diversified portfolio is likely to be the most rewarding over the long run. Furthermore, the longer the time horizon, the higher the returns you’re likely to see.


Goals, strategies, tactics

Best-selling author Seth Godin differentiates goals, strategies, and tactics.1 A strategy is what keeps us moving toward a goal, and tactics are the day-to-day activities for accomplishing the strategy. For example, if your goal is to be the best ballplayer on your team, then your strategy will probably involve being a fit and healthy athlete. The tactics might include working out regularly, spending more time practicing, and getting plenty of rest on your “off” days. Anyone else can apply your tactics, but they can’t steal the strategy because it’s uniquely personal and keeps you motivated for the goal.

If your goal is to save more money for retirement, then your strategy might involve becoming the best employee at your company and striving for higher pay. Tactics might include staying later at the office, showing up early for meetings, and making an extra effort to help clients. Again, the tactics are the things you can control each day that help accomplish the strategy that will get you to the goal.

Another tactic for retirement planning is to learn the ins and outs of your qualified plan options. Are you maxing out contributions to your 401(k)? Should you contribute more to an IRA? When does conversion to a Roth IRA make sense? Whether it’s estate planning, college education, tax reduction, insurance coverage, or getting out of debt, the specific tactics (that help move the strategy toward the goal) might require a bit of research. Consulting with a financial advisor could be part of that process as well.

Sometimes the best tactic is inaction. A diet might simply be skipping dessert after dinner—something you can do every day that doesn’t require jogging in bad weather or lifting weights at the gym. Cutting back on screen time can simply be not picking up the phone or tablet during certain hours of the day. Paying down a high-interest credit card balance might simply be putting the card in your sock drawer and not using it anymore. Tactics aren’t always things you do; they’re sometimes things you don’t do.


Get started

Most New Year’s resolutions fail because the tactics aren’t sustainable.2 People make ambitious plans—like getting up at 4 a.m. to work out, vowing to follow a sugar-free diet, or committing to saving X amount of money each month—but they can become nearly impossible to sustain for the entire year. One study showed that most people give up before the month of February!3 Therefore, when evaluating a strategy for reaching a goal, be mindful of which tactics are necessary.

If you try to reach a goal and it proves elusive, don’t quit. Reevaluate the strategy and see if you can adjust the tactics. We saved the most important part for last: Get started. It doesn’t matter if you’re reading this on January 1 or in the middle of June—the only way to reach a financial goal is to get going!

You’re probably serious about setting and achieving goals if you’ve read this far. You’re unique, so be proud of it. Also realize that no matter the challenges, you can overcome obstacles—as others have—by setting and framing SMART goals. If you don’t accomplish everything this year, it’s okay. The real measure of progress is that, after one year, you find yourself in a better position than today.

Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.

All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.

Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment, investment strategy or product made reference to directly or indirectly, will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance and results of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s investment portfolio. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. Diversification does not ensure a profit or guarantee against a loss.

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