Goal setting is an essential part of financial planning. No matter what it is you’re saving for retirement, a vacation getaway, or a down payment on a house you have to know your destination in order to plan your journey. Setting the right financial goals, however, can be more complicated than it first appears. Not only do you have to create a plan that makes you comfortable, but you have to do it with end goals and realistic expectations in sight.
How to Set Financial Goals
Be realistic: Your goals need to be reasonable and based on resources you actually have. You should be able to make changes without drastically altering the way you live. – Establish a time frame: Time frames allow you to track your progress, and hold yourself accountable to a goal. Accountability is one of the essential steps of any good financial plan. – Devise a plan: Your goal must be specific and measurable. This is one area in which a financial advisor can help you. – Be flexible: Goals can change over time, especially if you experience a major life change.
If you are having difficulty creating new financial goals, try to determine your financial priorities first. For example, consider which are your short-term goals (saving for a down payment on a car) and which are your long-term goals (saving for retirement). From there, you can sort your priorities into needs, versus wants (paying off a high-interest credit card versus saving for a summer vacation).
Priority one goals should be short-term needs; priority two goals should be long-term needs. Short-term wants comprise the third priority, and long-term wants are priority four. In this way, you can address your highest priority financial goals first, and better focus your financial resources for the future.
How to Stick with Your Financial Goals
Of course, no good financial plan is going to be effective unless you are consistent in your approach to saving and investing. In order to increase your chances of success, you should:
Save every month, even if it means you have to go without a few luxuries. Create an automatic withdrawal from either your paycheck or your checking account to guarantee that your designated amount is moved to savings every month. Base your budget on the amount you have left after your savings are deducted; in that way, you feel less like you are being deprived of your hard-earned money.
Choose financial goals that are satisfying to you, like paying off one credit card at a time. Being able to actually see the results means that you will be more likely to stick with it. Write your goals down and put them somewhere they can be seen daily. Revisit your goals regularly, keeping in mind that as your budget changes, your goals might also. Share your goals with your family so you can stay motivated together as you reach for the financial goals you have set before you.
Setting new financial goals is like picking the routes on your road map to financial security. Ultimately, reaching your financial goals allows you to have control over the future of your finances, and you may even find that you soon have money free for investing or for making large purchases that improve your quality of life.
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