We all have goals but do we put the work into making them a reality? When it comes to your money, you need to do more than just put it out into the universe. Making a financial goal takes planning.
Prioritizing your wants and needs along with learning how to set financial goals are all part of this adulting thing we are thrown into.
(This post may contain affiliate links. What does that mean to you? Well, if you click on a product and make a purchase, I may receive some compensation at NO charge to you. If you want to read the boring stuff, my full disclosure can be found here.)
We all like to say, “I’m saving money for __________” (fill in the blank with a vacation, a house, etc.). But do you just say it or do make an actionable plan and really get things set in a forward motion?
Financially planning isn’t hard when you know how to start…but it does take a little work.
What Are Financial Goals
You might think financial goals are something you have to set for the distant future. You know, decide where you want to be financially in the next 5, 10 or even 20 years. Knowing where you want to be in that time frame and planning for this is amazing and something you SHOULD do. But sometimes (more often than not) financial goals can be as simple as saving $500 to buy a new tv with cash.
It doesn’t matter how big the goal is, if it deals with money, it’s a financial goal.
I asked my friends and colleagues on Facebook for their financial goals and I received some great feedback.
- travel
- college for kids
- buying a home
- retirement funds
- emergency funds (or as we call it here…hurricane funds)
- income goals (from the entrepreneurs)
- buying travel homes
Why Set Financial Goals
Goals give you something to work towards and setting financial goals can help pull you out of that vicious paycheck to paycheck cycle so many people find themselves in.
Heck, setting a goal can even pull you out of the mundane rut of your everyday life. Knowing you have something to look forward to gives you a purpose.
We need to work to live not live to work. Even if your goal is to have an emergency fund for household repairs, that should give you peace of mind. Knowing you can easily afford to replace your fridge is a huge weight off of your shoulders.
To become successful in managing your money, it is important to set both short and long term goals.
When you have a goal and you actively and visually track this goal, you will learn to manage your finances better to make that goal a reality.
Yes, you must visually track your goal. Writing your goals down is a BIG step in achieving them.
How many times have you said something like, “I want to save money to go on a dream vacation”? Do you actually save?
But if you sat down and listed your goals, prioritized them into short and long term, made a plan and actually started to track your savings…THIS is where you will find the magic. THIS is where you are putting some action into your dreams. THIS is when you will succeed.
Think about this with any goal. How many times have you said you want to lose weight, get in shape, become healthy? None of this will happen just because you say it. But if you create a plan, set times, and visually track your progress it changes the entire game.
Let’s do that with your finances too!
Let’s get started!
How To Set Financial Goals
To set realistic financial goals, you must start at the beginning.
I know it seems so super cool to write a goal of taking a dream vacation with a hefty price tag of $20,000 in July. But is that achievable if you make a grand total of $28,000/year? I’m not telling you to stop dreaming, I only want you to succeed.
AND to do that, we must start with the basics.
How much money do you have?
You can’t know where you are able to go if you don’t know where you are. Just because you make $42,000/year doesn’t mean you have that much to spend.
You MUST know how much money you have and where it is going.
So it’s time to sit down and take a detailed look at your finances. Creating a budget is a crucial step in learning how to set financial goals and achieve them.
I’m not going to go in-depth on how to create a budget here but if you are unsure of where to start, THIS POST guides you step-by-step through the process.
- Know your monthly income.
- Add up all of your expenses.
- Track your spending.
- Where do you stand?
Creating a budget and TRACKING YOUR SPENDING will also give you the knowledge to see areas you can cut if necessary. Do you really need to have Amazon Music Unlimited and Spotify? Did you know you still had both of these coming out of your account?
Don’t let the word B-U-D-G-E-T scare you off. Having a firm grasp on the money coming into and out of your account is POWER.
By creating your budget, you will know EXACTLY how much money you have to set aside for your goals. This will also help you in establishing which goals are the most important. If you have smaller amounts to work with, some of your higher ticket goals might have to wait a little longer until your situation changes.
Write it all down
I call this a brain dump. Write everything you want down. Don’t hold back no matter how big or small your goal is, it’s still a goal.
Hey, we all want to be able to travel without worries and although that might not be a “right now” goal, it doesn’t mean it’s something you can’t work at.
Use this time to think of all of your financial goals, short term as well as long term. This is a great time to really think about where you want to go in your life.
Although looking at the big picture is important, you definitely want to put some possible short term wins on your list. If all of your goals are set to take place in years, you may tend to lose focus during the process. These small wins will help you keep that forward momentum for the bigger prizes.
Prioritize your list
Now that you have all of your financial dreams in front of you, it’s time to decide on what is short term and long term. This is really up to you but before you make all of your frivolous wants a short term goal…really put on your adult hat and make some sound decisions. {You will thank yourself in the future for doing this.}
If you are having trouble distinguishing between your short and long term goals see the examples below.
Some short term goals might be:
- Emergency fund
- Paying off credit cards
- Wedding
Possible long term goals:
- Retirement fund
- Your child’s college fund
- Paying off your mortgage
- Starting a business
There is no real line in the sand to distinguish between the two. It really is up to you. I have a 23-year-old daughter that talks about her retirement already when a lot of her high school classmates haven’t found their career yet. Both are OK.
Create a solid plan
Just because you have your created your budget and set some goals doesn’t mean everything is going to magically fall into place.
You must now decide on your plan of action to carry all of this out.
How much extra money do you have to put towards your goals and what is the best way to distribute that money?
You should also set a timeline to carry out your goals. Just be realistic and don’t set yourself up for failure. If you only have $20 extra each week, it’s impossible for you to have $5,000 in savings within 6 months.
Reevaluate your goals every now and then
Life changes do we. Something that is a priority to you now, might not hold true a year from now.
Take the time to look over your goals and reevaluate them as time goes by. Realizing you are headed in a different direction is normal and actually healthy.
No matter what your financial goals are, keep working to achieve them. They always say the best things aren’t easy.
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