Basic Financial Goals
Look at setting financial goals as a kind of road map to the financial future you want to achieve. Financial goals keep you moving in a forward path toward the life you want to have, now and later.
Financial goals (any goals for that matter) are based on your priorities. In theory, defining priorities is a simple process: decide what’s most important to you and put that item at the top of your list. Of course, as human beings there are some basic priorities that we all share as a matter of simple survival. These include water, food and shelter. Your first financial priorities then should suppose these survival priorities: pay the water bill, purchase groceries and pay your rent or mortgage. You might also include other utilities, transportation costs and normal household expenses on this list of necessities.
Setting Realistic Long-Term Goals
Once the immediate basics are covered, however, defining longer-term priorities can become a little more challenging. Obviously no one can achieve every single long-term financial goal they’ve ever dreamed of, so the task becomes honestly defining what you value and then establishing realistic, attainable goals.
Some examples of longer-term financial goals might include things like:
- Retiring comfortably
- Paying children’s school/college tuitions
- Getting out of credit card debt
- Putting a down payment on a residence
- Buying a new car
- Starting a business
- Buying new furniture
- Purchasing a dream vacation around the world
Turning Goals into Action
Step One: Create a list of long-term financial goals you have defined for yourself and prioritize them in order of importance to you.
Do a little research and assign a dollar value to each goal you set. Remember not to bombard yourself with too many goals. Be realistic and keep your goals attainable!
Step Two: Break down your long-term goals into medium and short-term goals. Smaller bites are easier to swallow:
- Long-term goals such as saving for retirement usually take more than five years to accomplish, and can sometimes take a lifetime.
- Medium-term goals are those that will take roughly between one and three years to achieve. An example might be buying a used car.
- Short-term goals can be accomplished in less than a year, for example, buying a laptop computer.
Medium- and short-term goals should be ones that help you attain your long-term ones. The short-term goals you set can be achieved monthly, weekly and even daily.
Step Three: Once you have prioritized your goals, make sure your daily spending is in line with them. If you make a big purchase, make certain it’s bringing you nearer to achieving your goals rather than taking you further away. Review your spending habits. Is your stated goal to save for your retirement but your outflow spent on going to expensive dinners? You’ll never reach your financial goals if it is.
Remember to review your goals regularly to keep them in the front of your mind. However, it is also important to remember that financial goals can be flexible. If a new opportunity arises or your life priorities change, you may want to modify your goals accordingly. It is probably a good idea to reexamine your goals and priorities about every five or six years to make sure they remain valid.
Making It Happen: Marketing to Yourself
Sometimes we need to keep selling ourselves on the idea of making and pursuing financial goals. Try these approaches on yourself to reinforce the value of what you are achieving:
- If you are starting to pursue financial goals that are more ambitious than what you’ve achieved previously, picture what your life will be like after you achieve the goal to help keep you motivated.
- Put your list of long-term goals in a place where you can see them every day. Sometimes an appropriate photo illustrating your goal can be an effective motivator as well. Knowing what you are working toward will help provide additional purpose to your life.
- Even the most disciplined of us can use a little outside support from time to time. It might help you to let some of your friends or family know what your goals are so that they can help keep you motivated as well. Remember, though, that your goals are ultimately only your own, and not everyone may agree with your choices.
For more ideas about how to set and keep financial goals, click here.
Financial New Year’s Resolutions
Do you include financial goals in the resolutions you set for the New Year? MMI’s recent survey revealed some interesting facts about financial New Year’s resolutions.
- Most Americans say they’ve never set financial resolutions.
- More Republicans have set financial resolutions than Democrats or Independents.
- Nearly half of those who have never set financial resolutions say they don’t set any New Year resolutions.
- Those who don’t set New Year’s resolutions tend to be men over 55, people who earn $50,000 or more annually, and homeowners.
- Other than inability to control personal events, changing priorities, and goals set too high, economic factors were named most for not being able to meet financial resolutions.
- Two thirds of those who set financial resolution say they’ve met them.
- Most people who have not succeeded in their financial resolutions said they can’t control the personal events that might disrupt their plans.
When asked why they don’t set financial resolutions, nearly one third say they don’t because they can’t meet the resolutions they set.