When it comes to personal finance and money related goals it’s important that we all set smart targets. You don’t want to set ridiculously high goals because you’ll disappoint yourself when you can’t reach them. You also don’t want to set easy goals because you want challenge yourself the way that you need to. You want to set financial goals that will challenge you and motivate you to become more successful with money management for the long term.
Let’s look at how to set-up financial goals:
Step 1: Figure out what you’re saving for.
Do you know what you’re saving for yet? It really helps when you have an end goal in mind. Some of us save for retirement. Some want a new car. Others are saving up for a new home. Some are even saving up for a wedding. We all have unique lives with diverse goals. You just need to figure out what it is that you’re saving up for. Once you figure this out you can move on to the next step.
Step 2: Determine your exact money goal.
Once you know what you’re saving for, it’s critical that you figure out an exact dollar amount for this goal next. If you’re saving up for retirement you’re number might be really exorbitant. If you’re saving up for a home downpayment you’re going to easily need thousands of goals. When you save up for a trip you’re only going to need a thousand bucks or so. You need to determine an exact dollar amount so that you know and understand how much money your savings account needs so that you can know that you hit your smart target.
Step 3: Plan how you’ll meet your goal.
Will you earn more money or practice extreme frugality? Maybe you’ll find a hybrid method that works for you. There are many ways to get to a final destination. For me I started off by learning how to save money. I started saving money on the major areas: going out, eating out, drinking, and clothing. Once I found that perfect point where I could save money and still enjoy life I moved on to earning more money. I’m 100% confident that if you learn how to save money and find a way to earn a little more money that you’ll be right on your way towards reaching your financial goals quicker than ever before. It’s a very lethal combination.
Which plan will you use to reach your financial goals? Do you have any interest in earning more money? Do you want to save more money? Some of us will reach our goals much slower due to our other life obligations. Others will exploit their situation (being young or living at home) to leap towards those goals.
Step 4: Create a backup plan.
Do you have an emergency fund? Do you have a backup plan in case things don’t work out? It’s important that you learn how to prioritize your finances. As you’re saving for your goals, you must remember to maintain a healthy financial cushion in case anything were to happen. You never know when life will throw you a curve ball and you need to spend some money to get yourself out of a mess. This is why a backup plan is always essential.
Step 5: Reach your goal.
If all goes well you’ll eventually reach your financial goal. You’re more likely to meet your goal to buy a new car than you are to retire. Some goals you’re going to have to wait a long time before you reach. If you do reach your goal you’ll be really excited and you can move on the next phase. It’s also important that you start off with a few quick wins. This means that you set smart targets to save up for a trip or something minor. This will give you tangible proof that you’re onto something with your new savings strategy.
Step 6: Repeat the process again.
Now that you’ve completed this process once you can do it over and over again. Saving money is a transferable skill. Once you figure out how to save up for one thing you can learn how to save for everything else. Let’s start reaching those goals.
I hope that by reading this piece you’re well on your way towards setting financial goals and reaching them. What are you waiting for?
Check it out the rest from the series:
How to Create Savings Habits
Good and Bad Debts: What’s the Difference?
(photo credit: chris_britton)