Saving money seems great, why wouldn’t you want to have more money?
Saving money sounds good in theory, but too often I hear that savings goals seem impossible.
How often do you hear of people saving up cash to pay for something these days?
More often you hear of financing even short term financial goals in the form of using credit cards and taking out loans. Don’t get stuck in this cycle.
But what are you saving for?
Having a goal will change the way you look at money. If you have any big dreams for your finances, such as retiring one day, you need to start setting financial goals. Goals will make you more aware of your spending, when you spend on miscellaneous items you realize how quickly that can add up and take away from your big dreams.
If you want to succeed in your big dreams financially then you’ve got to determine what you value most and prioritize that over miscellaneous and monotonous spending.
How to set a financial goal:
1. Determine what long and mid term goals you’d like to achieve. Write them down.
This is a time when you get to realistically and whimsically dream about all of the things that you would like to do in your future. They may seem far-fetched or expected but write them both down. For time reference think 5+ years.
2. Ask yourself, what needs to happen differently financially to achieve those long and mid term goals?
In order to achieve the goals that you have set in the previous step you need to thing about what it will take to achieve them? Do you need to change habits? Do you need to save money? Do you need to free up money? Do you need to make more money? Answer the question so you know what you need to start doing to make your dreams come true.
3. Determine what short term goals you would like to achieve. Write them down.
After sorting out what mid and long-term goals you have set for yourself now take some time to determine what short term goals you would like to and need to achieve. These can be adjunct to your mid and long term goals or stand alone goals. For time reference think 0-5 years.
4. Look at your expenses from the last month and create a written budget.
This step is important because you can’t get to where you want to be if you don’t know what you’re spending money on. This is an in-depth look into all of your spending habits for the last month. You’re going to write them all down, take a note of categories such as food, transportation, personal, entertainment, miscellaneous, etc. and tally up how much you spend in each category.
Add up all of your expenses and subtract that from how much money you took home this month. The number leftover should be a positive number or zero. If you were in the negative you have a little bit more work to do, but that doesn’t mean that you can’t achieve your goals.
This step is crucial to starting to make financial changes, do not be blissfully unaware any longer.
5. Ask yourself what needs to happen differently financially to achieve the short term goals?
After completing your budget reflect on the categories you spent in and determine what you want to keep in your expenses and what you can let go of to reach your goals. This may seem like sacrifice or deprivation to some people, but those people haven’t figured out what they value most in life properly then. If you’ve written down goals that matter to you then “sacrificing” a daily coffee from your favorite barista shouldn’t be life shattering. Remember the end goal.
6. Make your goal specific.
For each short, mid, and long term goals you will need to write it down. This may be the long term goal or a short term goal that helps you achieve a longer goals, or just a stand alone goal. Regardless, in this step you are going to make specific goals. It can be anything from saving $500-1000, to paying off a credit card, to paying off your student loans, to saving up for your first house, to having a savings rate of greater than 60%.
Your goal is personal so think through what is important to you, be specific in what you want. Do not be the queen of vague, the more specific the better.
7. Set a deadline.
Depending on your goal determines how long your deadline should be. Being specific helps keep you accountable to the tasks that must be done. If you are worried about the date being too ambitious you can use the Good, Better, and Best Goal Setting template I have to set realistic to ambitious goals.
8. Determine what needs to happen on a daily or weekly basis to achieve your short, mid, and long term goals.
When working toward your goals daily or weekly tasks can help you stay on track. Write down what tasks you can do to stay on track to reach your goals.
9. Tell someone who will keep you accountable.
This step is vital many people need outer accountability to stay on track for their goals. Think back to when you participated in a high school activity or sport, you were able to show up for practice or rehearsals without missing them much or at all.
Now, think about what it takes for you to have that much commitment now. Is anybody depending on you to achieve these goals or is it just yourself? If somebody else is checking in with you to make sure that tasks are getting done I believe that you will be able to stay more accountable.
10. Check in with your goals on a regular basis.
You want to make sure your goals are staying relevant to your overall life goals. This requires periodic check-in‘s. Depending on what you’re working on you may need to check in monthly, or quarterly, or even annually. Just make sure you are checking in.
Financial goals help to change your mindset, your habits, and subsequently your life.
When you become more aware of what your goals are, how you’re spending your money, and how to prioritize your spending you can really make changes that will impact the rest of your life.