Our choices mirror our lives. This is especially true when it comes to our financial decisions. Poor financial choices spell financial disaster. Excellent money moves will bring you closer to financial freedom. Mediocre decisions also translate to mediocre gains. But whatever your choices are, one thing is certain: The choice is definitely yours to make.
As far as money matters go, we are all faced with debts, bills to pay and barely sufficient income to pay all obligations while preparing for a secure financial future at the same time. Yet most of the time, the difference between success and failure lies in your resolve. If you believe that you can accomplish your goals and work towards achieving them, then you’ll be amply rewarded.
Once you have committed yourself to achieving success, the next thing you need to do is to set financial goals. And by this we don’t just mean setting any goal. You have to dream big. You have to set the loftiest goals you can think of. Later on, you can think of breaking them down to smaller and attainable pieces.
What if you haven’t tried setting goals before? Where do you start? The next few paragraphs will outline the steps.
1. Set a time for setting goals.
Determining your financial goals is an activity that requires clear thinking. You can’t really set clear aims for your financial future if you are multitasking. Try clearing an hour or two from your schedule this week so you can use that time specifically to determine what your financial goals are. If you already have a basic idea of where you want to be financially then perhaps an hour will be sufficient. If not, you might need more than that. Make sure that you don’t attend to any other business at this time.
2. Determine where you want to see yourself financially five to ten years from now.
This is the start of your self-exploration as far as your thoughts about money go. Don’t be afraid to write down the ideas that come to mind even if you think they are unachievable now. Of course, you need to focus on things that will put you on the path to financial security.
3. Choose a short-term goal, a long-term goal and a seemingly impossible-to-achieve goal from the list you have generated in the second step.
This is the step where you will officially start determining your goals. For your short-term goal, pick the one that you think you will be able to achieve in six months to one year. This could be something you want to buy, such as a laptop or any other gadget that will enhance your work or allow you to improve yourself professionally. This could also be paying down a small amount of debt.
The long-term goal refers to something you could possibly achieve in the next five to ten years. This might include paying large amounts of debts or perhaps saving for a house downpayment. This kind of goal might be challenging but is still attainable for as long as you put your energies on making it happen.
Finally, the last goal you should choose is the one that you feel you would not be able to accomplish. However, it should be something you still want to achieve given the chance.
After you have chosen your goals, you should write them down on paper or type them in your computer if you feel more comfortable typing them down. The whole purpose of writing down your goals is to concretize them and make you responsible for them. One notable children’s educator has said that what goes to the head comes from the hand. Maria Montessori was referring to the importance of letting children practice their handwriting so the lesson sticks but this could easily apply to your goals. To really own your goals, you need to write them down.
4. Break your goals into attainable chunks.
Lofty financial goals can overwhelm you. Thus, it’s important to find out ways to attain these goals one little step at a time. For example, if one of your goals is to be able to purchase a $1,000 laptop within a year in cash, try to break down the price tag. Divide $1,000 by 12 to represent the amount you need to put away each month so you can gather the money by the end of the year. That would mean setting aside $83.33 a month so you can come up with the money. If you are paid twice a month, then divide that by 2 so you will know how much to set aside when the paycheck comes. Do this with your other goals, whether it is to pay down debt or save money for a car or house downpayment.
The next step in breaking down these goals to attainable chunks is to determine what you need to do to be able to come up with the amount you need. Will you need to lessen the food budget? Perhaps you might need to stop eating out for a while. What if mere belt-tightening measures will not be enough? You might need to be a bit more aggressive. Outline what you need to do to earn extra money. Perhaps you can take a second job, sell things you don’t need or if you feel you deserve it, negotiate for a raise.
The whole idea of breaking down your goals is to make them specific and attainable. You’ve already seen the big picture when you chose the three goals that will describe where you see yourself in five or ten years. Now, you need to concretize what you can do on a daily, weekly or monthly basis to make that view a reality.
5. Track your progress.
It’s not enough that you write down your action plan for achieving your goals. Now, you need to constantly monitor where you are as far as achieving them is concerned. It would be ideal to track your progress on a monthly basis. Ask yourself if you were able to put to action your plans for the month. If you haven’t, determine the areas where you failed. Perhaps you overspent or went over the budget. Perhaps an unexpected expense came up and you had to realign funds. Whatever the reason, find out what is causing the leak so you can put a plug on it.
A word on unexpected expenses is appropriate at this time: You need to set aside funds that will be able to deal with these unseen emergencies. Without a rainy day fund, you’ll have a hard time achieving your financial goals since you will always be reallocating funds you’ve set aside for your goals. Experts recommend setting aside three to six months of living expenses to help you deal with financial emergencies.
6. Congratulate yourself for milestones achieved.
If you succeeded in saving money or paying debt then give yourself a pat on the back. Look at this as an opportunity to encourage yourself to keep pushing towards your goals. The road is definitely not easy as far as reaching financial security goes but if you see yourself taking baby steps and actually getting to where you want to go then you have something worth cheering about.
7. Don’t be afraid to realign your goals if they don’t anymore apply to your situation.
Although goals give you something to strive for, they are not set in stone. Sometimes, your values and your priorities change and this will consequently mean that you won’t have the same goal than the one you had originally worked towards. That’s okay. Just repeat this goal-setting process and start working towards your new goals. However, do keep this in mind: Don’t make any changes to your spending and saving habits until and unless you are very sure that you have a new goal to work for.
Conclusion
You might be wondering why we have placed so much premium on setting your goals. The rationale behind this is that you can never go anywhere with your financial plans without a set goal to strive for. In fact, goal-setting applies to all other aspects of your life, not only about money matters. For instance, if you want to be able to attend an Ivy League school, you need to excel academically, showcase your leadership skills and participate in co-curricular activities while you are still in high school so you can increase your chances of being accepted.
If your goal is to be able to design a computer program that will allow you to strike it rich even without a college degree, you need to expose yourself to computers and new trends in programming early on.
Don’t take goal-setting lightly. This is the first step you need to take to secure the financial future for yourself and your family. The rest will follow.
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