Financial goals are different than financial dreams. While dreams are something you someday hope to achieve, goals are something you have carefully planned for. Setting goals allows you to take charge of your money, assess you current financial situation, and figure out what steps you need to take in order to slowly improve your finances over time. There are three things you need to do in order to successfully set financial goals.
Write them down
Start with the easiest part – writing your goals down. Some might be big, like buying a house or paying off your credit card debt; others might be smaller, like saving for a new flat screen TV. Either way, you have to make sure that your goals are as specific and realistic as possible. For instance, earning 1 billion dollars in the next six months isn’t realistic, unless if you own a Fortune 500 company.
Set a target date
Once you have written your goals down, create an estimate of how much they will cost. Then, figure out approximately how much time it will take you to save the amount of money needed to reach them and set a target date for each goal on your list. Use this as your deadline – if the goal isn’t time-bound, it’s possible that you will lose your motivation along the way and be tempted to fall into the trap of procrastination.
If you don’t have a monthly budget by now, you should really make one; budgeting is the best way to minimize your chances of overspending. It’s not as difficult or unpleasant as it may sound at first. It simply means that every month you allocate a certain amount of money for every expense you have (like rent, personal shopping, groceries, entertainment, savings) and you do your best to stay within that limit.
Now, calculate how much you will need to save each month to reach your goals, based on the estimated cost of your goals and your target date. Include that amount in your monthly budget, under savings.
That’s it. It’s time to put your plan into action and watch your goals turn into reality. Good luck!