You have been working hard all your life yet you feel like your financial situation remains the same. You still struggle to make ends meet. What is it that you are missing? What can you do to change your financial life for the better? The answer is to define your goals. Setting financial goals is your key for a better tomorrow.
If you want to have a fresh start in your financial life, the first step is to set financial targets. Having a financial goal will help you make better financial decisions. It will also influence your day-to-day behaviour. Think of it as going on a trip. You need to know where you want to go first before you can even plan out the details of your trip. Thus, setting financial goals is important for a better tomorrow.
So, what’s your financial goal for this year? If you still don’t have one, it is for your best interest that you start having one now. No matter what age or stage you are in your life right now, even if you are already financially stable, you still need to set your financial goals.
Here are the steps on how to set your financial goals:
1. Determine what you want
In setting your financial goal, the first thing that you have to do is ask yourself. What is it that you want? Do you want to get out of debt? Do you want to have that dream house? Do you want to buy a new car? Do you want to go on that dream vacation? List down all the things that you want to have and accomplish.
2. Classify your goals into Short Term, Medium Term and Long Term
It is impossible to achieve all your goals at the same time. Thus, it is important that you arrange them according to what’s important to you. Learn to prioritise. What is it that you that you want to accomplish first?
For example, you are in your 30s. You want to retire wealthy. You have a child who will start schooling in four years time. You also have a credit card debt that is ballooning. How should you set your financial goals?
Classify your goals into:
- Short Term – those that needs to be done in the near future or at least within the year. In the scenario above, your short term goal should be to settle your credit card debt first.
- Medium Term – refers to a period of time that is not in immediate yet not too far in the future either. It normally pertains to those goals that you want to accomplish in 2 to 4 years time. The child’s tuition fee in the previous example is a medium term goal.
- Long-term – pertains to goals in the future usually 5 years onwards. If you are in your 30s, retirement goals will obviously fall into long term goals.
3. Estimate the amount that you need
Since we are talking about financial goals, numbers are very important. You need to know the amount that you need in order to accomplish your goal. For example, your goal is to travel. Estimate the amount that you need to cover your travel expenses. Then, figure out how much you can separate each month for your travel goal. Knowing how much you need can give you an idea on how long it will take you to achieve your goals. Remember, goals must be SMART meaning specific, measurable, achievable, relevant and timely.
4. Budget
Budgeting is a must when it comes to financial goals. Budgeting allows you to have a spending plan for your income. Without a spending plan, there is a tendency to splurge on unnecessary expenses. It will also help you stay on track towards the achievement of your goals.
A good way to budget is through the money jar budgeting system. It is a system wherein you will be able to purchase what your needs and wants yet at the same time limit your spending and grow your wealth in the process.
5. Monitor your progress
Monitoring your progress is very important because it keeps you motivated. It will also allow you to adjust if not your goals but the process on how to achieve your goals.
6. Celebrate small wins
Celebrating small wins will help boosts your confidence level. It will make you feel that you are able to accomplish something and that you are now one step closer towards the achievement of your bigger goal. It will motivate you to keep on going forward.
What are you waiting for? Define your financial goals now. Setting financial goals is your passport for a better tomorrow.
Image Credit: Gerd Altmann from Pixabay Images
