Setting Financial Goals
Knowing how to successfully manage your personal finances is a key factor in controlling debt and achieving your long-term financial goals. It is important to choose and follow a specific path that will allow you to reach your own personal financial goals. Without a detailed plan for spending and saving your money, it is very easy to drift along and leave your future to chance. There's a saying that goes: “Most people don't plan to fail, they just fail to plan.” Unfortunately, the end result is always the same: failure to achieve financial independence.
Many people have financial dreams. But this is very different from having financial goals. A financial dream is something you hope for but a financial goal is only achieved with forethought and serious planning. The planning (not hoping) is what turns a financial wish into a financial reality.
What is a Financial Goal?
Here is a sampling of what a financial goal should state:
- What you want to achieve
- What resources will be needed to successfully accomplish your goal
- How long it will take to reach your goal
- How to plan your goal so that it fits into your overall budget and lifestyle
It's important to remember that there are different types of financial goals for which you should plan. The smart individual will begin saving and investing now for short-term, intermediate-term, and long-term goals. The following are common examples of these different goals:
Short-Term (less than three years)
- Begin a disciplined savings and investment plan
- Establish/build a solid credit history
- Pay off all outstanding debt
- Fund an emergency savings account of at least 3-6 months of basic living expenses
- Purchase a vehicle
- Obtain appropriate insurance coverages for your personal situation
Intermediate-Term (three to seven years)
- Provide for advanced education
- Plan for a wedding
- Accumulate funds for a down payment on a home
- Increase income for other goals or to reach your goals ahead of schedule
- Prepare for the adoption or birth of a child(ren)
Long-Term (more than seven years)
- Plan for long-term health care
- Maintain your desired standard of living
- Fund your children's college education
- Plan for your retirement
- Consider and plan for the possibility of supporting aging parents
- Evaluate your housing options (including retirement)
A Simple Financial Goals Worksheet
Here is an easy way to start a financial goals worksheet:
1. List your goals. What do you want to achieve? Are these short-term, intermediate-term or long-term goals?
2. Determine an amount. What will it cost to accomplish your goals?
3. Choose a target date. When do you want to reach your goals?
4. Write down your goals. This process helps you assess what you really want or need.
5. Prioritize your goals. This allows you to develop a plan which is both realistic and easy to follow.
6. Formulate a plan. Establish and maintain a budget which includes your financial goals.
7. Evaluate your progress. Review your progress however often you need to. It can be monthly or quarterly or whatever time period works for you but at a minimum do it twice a year. If you don't feel you are making substantial progress, re-evaluate your approach and make the necessary changes to be successful.
Tips to Achieving Your Financial Goals
The following time-honored tips can help you stay the course on your journey to financial independence. Remember, the most important thing is to do something and to start now.
- Stay motivated by frequently checking your list and evaluating your progress.
- Financial setbacks will inevitably happen. Don't give up! Set a new target date and keep moving forward.
- Be realistic. Honestly determine the amount of time and money a specific goal will require to be achieved. Underestimating will only cause frustration.
- If you are overwhelmed with the number of goals you have, choose the most important ones and prioritize them. You will never meet your goals if you can't stick to your plan.
Millions of Americans have no idea where their money goes each month. The number of people who live “paycheck to paycheck” is growing everyday thanks to a sluggish economy, high unemployment, and the rising costs of food and other basic necessities.
Having a clear picture of your current financial situation is essential if you want to successfully plan for your future goals. Financially smart consumers know that you have to take control of your money and not let it control you. Once you do this, you can face your financial future with confidence!