If you’re currently stressed about money, you are certainly not alone. However, you don’t have to stay stuck in a state of financial stress. By setting smart money goals and sticking to them, you can better prepare yourself for the future, lower your debts, boost your savings, establish a college fund for your kids, and have way fewer sleepless nights. All it takes is five minutes to get started.
What are financial goals?
In short, financial goals are monetary targets that you establish for yourself and your family. Most of the time, they are based upon specific needs both in the present and the future. Typical financial goals include establishing a savings account, building a college fund for the kids, paying down debt, saving for a down payment on a home, or investing.
Financial goals are also commitments that should become habits. Whether it’s having money automatically taken from your salary to put into your retirement fund, or paying off your credit card in full every month, they become routine ways to manage your money and take control of your current and future finances.
Why you should have financial goals
By setting financial goals, you are being responsible with your money and setting yourself up for a more secure future. Without financial goals, you are leaving yourself wide open for all kinds of money problems.
Having no monthly budget can quickly lead to overspending on reckless purchases. When you have no idea where your money is going, it’s hard to make smarter choices about it. Without a savings account, one emergency can drastically upset your current finances. You may be forced to take out a high-interest loan or turn to credit cards, both of which can takes decades to pay off. And a retirement fund is critical. With no retirement savings, you put your future self at great financial risk. To be blunt, without any goals for your money, you’re asking for trouble.
How to create financial goals
It is relatively easy to create financial goals, although sticking to them can be a little more tricky. Get a pen and paper, or use your computer or smartphone, and write down every financial goal you have. These can include things such as being debt-free, having six months’ worth of salary in a savings account, or hitting the max contribution limit for a retirement account. Make a complete list of every target you want to hit.
Next, stack these goals in order of importance; which one is a burning issue, and which one can wait? For example, if one of your goals is to save for retirement, the sooner you start putting money away, the faster it will grow.
After you have stacked the list, establish reasons why each goal is important to you and why you need to stick to the goal. Motivation is key. Then, display your list prominently in the kitchen or hallway. You have just created your financial goals.
How are you going to achieve those goals? Start by taking an audit of your current finances. Look at every cent you have coming in each month, and every cent that goes out. Where is your money going?
Identify the bills you have to pay (mortgage, car, credit cards) and the flexible, unnecessary expenses you can cut (dining out, entertainment, clothing). When you free up money from your budget, put it toward your financial goals based on their importance. If paying down credit card debt is Number One on the list, for example, you can use the snowball method in which you tackle smallest balances first. The act of paying off a debt in full, even a small one, is a mega boost to your motivation to keep going toward the next money goal.
In order to make your financial goals really effortless, automate them. Having money automatically withdrawn from a paycheck to pay off a credit card or fund a retirement account means you won’t have to rely on memory and willpower to make it work.
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