Setting financial goals is imperative if you want to be successful when it comes to money.
The amount of money that you have does not equate to success but the progress you make with each financial step does.
Come January you will see lots of people making goals for the year ahead. Sometimes they stick to them and other times they don’t.
People always overlook setting financial goals when in fact your financial goals are really important to the way you are going to live over the next year and maybe even beyond that.
How do you measure progress if you don’t know where you are starting from?
I’m sure you’ve heard of the saying before a person that never sets a goal always gets there. That is not a compliment.
It’s like getting into your car without a destination. Pointless. You will only end up going around in circles.
Remember you don’t have to wait until January to set your financial goals or any goal, as a matter of fact, you can do it at any time.
Setting financial goals means that you are making a plan for where and what you want to do with your money.
It’s so important to plan for your future because if you don’t, life will literally just happen to you and you can easily fall into debt.
So how do you go about setting up financial goals?
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Here are 5 tips to help you get started
1. Make sure these 4 things are in place to begin with:
You must have a working budget if you want to make any kind of progress in your financial situation.
Your budget must be a priority before you can even think about beginning to set financial goals.
If you’re not sure how to go about creating a budget you can take a look at my post on budgeting for beginners here.
2. Emergency fund
Having an emergency fund is one of the most important things that you should already have in place.
Your emergency fund will help you to stay out of debt when you could easily fall into it.
An emergency fund is just that. It is to be used for emergencies only. It is specifically for things that you could not have planned for such as your roof falling in or an unexpected medical bill.
Your emergency fund should not be used for things such as holidays or a shopping spree.
If you don’t have any debts outstanding then you should have an emergency fund saved up of anything between 3 – 6 months worth of expenses.
If on the other hand, you do have debts you should aim to save up $1000 (£1000), to begin with.
Always have a plan for retirement in place. It could be a private policy or one through your job. Just make sure you fully understand it and will have enough put away for when you do eventually retire.
Retirement is never a surprise event, therefore, make sure you have a plan in place before you get there.
4. Pay debt
You must always take care of your debts. Don’t just leave them to fester by paying only the minimum requirement.
Using the debt snowball method is a great way to quickly clear your debts so you can focus on the future.
2. Think about what is important to you
Don’t rush with this part. Really take your time to think about what is important to you and what you want to achieve.
It could be that you want to start a college fund for your child, save up for a new home, get a bigger car or start to make passive income as a side hustle.
No matter what it is you must make it a goal if you truly want to achieve it.
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3. Is it a long term or a short term goal?
Consider the time frame of your goal.
Typically you would have short term goals which could be anywhere from 3 – 6 months, medium goals, from 6 months – 1 year and long term goals from 1-3 years.
You can even make your long term goals longer than this if you wish. Don’t feel restricted.
Separate your goals so you can look at them in the time frame that you want to achieve them.
This will help you to stay motivated and on track to meet them.
If it would help, you can even have mini-goals along the way laid out to help you to get to your long term goal.
An example of this could be wanting to earn an extra £5,000 of income each month in 1 years time.
What are the steps that will get you there?
Will you pick up a side hustle?
Will you learn a new skill?
Do you have a service you can offer?
Are you going to get a higher paying job?
Answering these questions will help you to set the smaller goals to be able to reach the big goal of earning an extra £5000 a month.
4. Make sure your goals are realistic
There is no better way to demotivate yourself than setting a goal that is unrealistic or simply just unachievable.
An unachievable goal would be something like trying to buy your house outright in 6 months.
Unless you know something specific will help you to pull this off don’t set yourself up to fail.
If you want to know if that goal is realistic or not take a look at your budget and see how much wiggle room you have.
You could also decide to take on extra work to help you achieve your goals.
5. Write it down
If you have a goal in mind make sure that you write it down.
It’s so important.
I can’t tell you the number of times that I have set a goal for myself and not written it down.
Usually, one of 2 things will happen.
1. I will forget that I had the goal
2. I have no way of measuring it and therefore don’t know if I am moving towards it or not so I ignore it.
Don’t do that. Make your financial goals as clear as you can, remembering to take note of the date that you set it.
Your goals should be so clearly written that someone that does not even know you would be able to see your goals and fully understand it.
Final thoughts on setting financial goals
Setting goals can seem really boring but they are going to be so good for you.
They will help you to stay focused but not only that after you have completed them it is a great reminder of all the things you can achieve once you put your mind to it.