BUDGETING

Setting Practical Goals

Setting financial goals is crucial to create a clear roadmap to achieving financial stability. These goals increase your motivation to do better for yourself, and they paint a picture of your desired lifestyle. Before you start creating this list, it’s important to understand your types of goals, steps to achieve them, and any barriers that could prevent you from staying on track.

Identify Your Goals

As you start to consider a few things you would like to accomplish, be sure to figure out your reasons behind them. Assessing your current financial situation and why you’d like to make changes can help you determine which goals are most important. Whether you’re looking to purchase your first vehicle or establish emergency savings, there’s a reason behind everything. Try writing all your goals on a piece of paper or in an Excel spreadsheet. Once you’ve created a list, you can analyze each one and determine their importance, placing low-priority items on hold or erasing them altogether.

Short-Term, Mid-Term, Long-Term

Once you establish a list of goals you’re looking to accomplish, categorize each goal into one of three types based on your timeframe. The first category is short-term. These goals can typically be achieved within one year. This can include smaller goals like establishing emergency savings, starting a side hustle or even increasing your credit score. Next, we have mid-term goals. This time frame of completion is anywhere between three to five years. This can include goals like saving toward a down payment on a home, purchasing a new car or saving a specific amount for a travel fund. The last goal type is long-term. This can include things such as paying off student loans, eliminating your mortgage debt ahead of schedule or starting a business. Be sure to recognize which goals make the most sense for each category based on how long you think it would take you to accomplish them.

Create a Plan

Now that you understand your goals and the time it will take to attain them, you’re ready to create a plan. Most financial goals require a saving method. Consider creating a budgeting strategy that can accommodate most of your goals, whether they’re short-, mid- or long-term. Add as many budgeting categories as possible based on your expenses and take advantage of any automation opportunities for paycheck deposits directly into your savings. If you’re looking at debt repayment goals, try exploring the avalanche and snowball methods. These are great strategies that focus on paying off one loan at a time. Whatever your goal is, it’s important to use a medium that can be monitored to check your progress. This can help increase your motivation to stay consistent to reach your goals.

Setting goals can feel overwhelming and sometimes discouraging because of the amount of time it can take to reach them. However, as long as you develop a strategy for each individual goal, stay consistent and be proactive in your planning phase, you can be successful in your journey. Take the time to brainstorm any current or future barriers that could prevent you from reaching your goal and get ahead of the problem before it even happens. And remember — celebrating even the smallest wins is a part of the journey, because you’re determining your own path forward.

Sources:

https://www.investopedia.com/articles/personal-finance/100516/setting-financial-goals/