Goals are often a great motivator. They can push us to complete a gruelling athletic event or reach the top of a mountain trail. In other instances, the right goals can help us improve our financial security and stability.
No matter what kind they may be, the best goals are those we succeed in reaching. With personal finance, as with anything, our goals need to be realistic. They need to be based on hard numbers and achievable outcomes.
Learning to set realistic goals is one of the lessons of Financial Literacy Month, which is being marked in November. Good financial goal-setting requires a bit of a balancing act between different priorities, obligations, and expenses. Done right, realistic financial goals can lead to improved financial resilience.
Here’s some advice to think about when setting financial goals.
Be specific about what you want to achieve
Vague, inexact wishes are the enemy of good goal setting. Definable outcomes, however, help establish the steps necessary to reaching your target, whatever it may be. Perhaps your goal is to save for a dream vacation. Maybe you want to purchase property. Or maybe you’re ditching your job to launch a small business. Once you have a clear end point in mind, you can start plotting all the small steps and mini-goals along the way that will ultimately lead to a larger achievement.
It begins with a good budget
Understanding where our money goes each month is essential to knowing how to allocate it toward financial goals. The numbers behind good, realistic financial goals will be based on the real spending habits in your budget, so make it accurate and detailed.
Once you’ve built a budget (or downloaded an appropriate app) to keep tabs on your spending, you’ll need to stay up to date on the numbers and make sure you’re staying on track. From time to time, you may also need to adjust your budget to account for any changes to monthly income or spending.
Set goals for different life stages
Financial planning is a lifetime job, with changing needs and demands as you progress along your path. That means you need goals that account for all three of your short-term, medium-term, and long-term financial needs. For instance, even while you’re working to pay back student debt, you can’t forget about contributing to future savings, or keeping enough cash around to handle any emergency expenses that may come up.
Be willing to roll with some punches, and re-adjust as required
Whether we like it or not, life happens. As you pursue your financial goals, unexpected expenses will no doubt arise from time to time, interrupting your progress and forcing a temporary reallocation of resources.
Although it’s certainly irritating to fall short of financial targets, don’t be discouraged when expenses throw you for a loop. Get back on track as soon as your budget and circumstances permit, and update your timelines and targets if necessary. Being flexible and adaptable will help you get to the finish line and turn your financial goals into reality.
Find a buddy to support your journey to financial goals
Achieving financial goals is always easier when it’s done with trusted support. Whether it’s a partner, friend, or financial professional, find someone (or several people) you can turn to for encouragement, understanding, and accountability. Be willing to share your goals and ask your supporters to do their part to help keep you on the path to achieving them.