Money may not buy happiness, but having your finances in order can definitely facilitate it. When finances are so integral to your daily life, having them in good shape means you can pursue your ideal future.
Whether you have plans of buying a house, taking a lavish vacation, or simply funding your retirement, setting goals and realistic ways to work toward them will help you. Knowing how to set and achieve your financial goals will help you in this process.
Get Your Budget in Order
The first step in any financial journey is making sure your budget is in order by identifying your current income and expenditure and figuring out how much money can be realistically allocated to your goals.
Start by adding up all of your sources of income, and then writing out all of your usual expenses, such as food, bills, housing, incidentals, fun money and anything else you regularly purchase. A financial solutions provider like Achieve can assist you with this process.
Decide What You Want
Once your budget is in order, you can begin choosing where to prioritize your financial efforts. Financial goals are often short-term, medium-term and long-term plans for your finances.
Make a list of your goals, sort them into short-term, medium-term and long-term goals, then start prioritizing which are the most important to you.
Some of the most common financial goals include:
- Funding retirement
- Setting up an emergency fund
- Purchasing/paying off a house
- Paying off debts
- Saving for college
- Saving for a vacation
Set SMART Goals
Once you have an idea of what you want to achieve, you can start setting concrete goals. The key to a good goal, whether financial or otherwise, is to set SMART goals. SMART goals help you to formulate a plan that you can follow to achieve them. The structure is built around designing goals that have clear success metrics and defined steps to get there.
A SMART financial goal would offer more structure than simply stating you want a saving or to go on a trip or to pay off debt, such as, “I want to save $300 each month,” or “I want to be credit card debt free by the end of the year.” SMART goals are:
- Specific: Goals must be specific to be effective because they define what success looks like. A specific goal will tell you what you will accomplish, who will make it happen, and what steps must happen. For example, you want to pay off your credit card debt by using the snowball method.
- Measurable: By making all goals measurable, you quantify your goals. Quantifying your goal gives you a clear finish line to meet. In this case, you’d outline exactly how much credit card debt you have so you know what that finish line looks like. For example, you want to pay off all $10,000 of credit card debt.
- Achievable: Achievable goals help keep you realistic. Having looked at your budget, is the goal you’ve chosen realistic? Can you pay off that debt by the end of the year with your current income and expenditure? If you can’t, go back and rework your goal until it is feasibly achievable.
- Relevant: Relevance becomes important when considering your goals because it defines why you choose to make your goal. Perhaps the relevance is that if you pay off your credit card debt, you’ll have a better credit score and less money going toward payments, allowing you to start working toward buying a house.
- Timely: Finally, your goal must be timely, meaning that there’s a clear due date, so to speak. You must have a time when your goal must be completed by. For example, you want to pay off all $10,000 of credit card debt by the end of the year.
By learning how to set and achieve your financial goals, you put yourself in a position to succeed. If you find that even with these steps, achieving your goals is difficult, consider speaking to a financial solutions provider today to give you that added support you need to succeed.