Setting Financial Goals
by Linda Jacob
Goal setting is the step most people want to skip. It takes time and effort. However, setting goals is the platform for your successful money management plan. Goals help you decide where to spend your money. Goals help you decide how to invest. Goals are going to help you stay motivated and on track. Start by dividing your goals into three categories: Short-Term, Mid-Term, and Long-Term.
Your Short-Term Goals are those that you want to accomplish in the next twelve months. Maybe there is a specific credit card you wish to pay off or you need to buy a new dishwasher and you don’t want to put it on credit. There is only one short term goal that I insist my clients have: fully fund a $1,000 Emergency Fund. Having an emergency fund will save your budget from failing and prevent you from using your credit cards.
The Mid-Term Goals are those that you want to accomplish in the one-year to five-year timeframe. Do you want to buy a car for cash? Put 20% down on a house? These goals are bigger, but not huge. They will take a little more time than a year to fulfill.
And finally, your Long-Term Goals that are going to take longer than five years. How will you pay for college for your children? Write out what retirement looks like and how you map it. Dream big if you have time to work on these goals. Your long-term goals might be grandiose as you dream of retirement. It’s OK if your goals make you sweat a little.
Now, calculate how much you need to save each month/week/paycheck in order to accomplish each goal. Take the dollar amount needed to achieve your goal, and divide it by the number of months/weeks/paychecks you have until you need the money. This will tell you what you need to be saving. Then, add this onto your budget sheet and treat it just like a bill.
Once you have written out your goals, you are ready to display them in a place where you can see them and be reminded of them daily. I like to put mine inside the closet in my bedroom. I look there every day and they keep me motivated to make good money decisions. Another great place to post your goals is the inside of the cabinet where you store the coffee. Find your place and post your goals.
Sometimes your goals change and that’s okay, as well as expected. It’s important to review your goals at least once a year and set new ones. Our lives are anything but static, so why should our goals stay the same year after year?