Financial Goals: What Is The Best Way To Set Them
Every successful person – Elon Musk, Oprah Winfrey, Mark Zuckerberg, Jeff Bezos, and Steve Harvey - always urges people to have goals in life. The goals can be financial, spiritual, social, or family goals. In this article, we'll discuss the best ways to set your financial goals and reach them.
Financial Goals
These are goals meant to improve your financial life. They can be investments, savings, or spending targets. They are simply the plans you have for your money.
What Is the Best Way to Set Your Financial Goals?
Set Realistic Goals
What do I mean? Well, the first step to setting your financial goals is to set them. Write them down somewhere. It can be a piece of paper, a spreadsheet, using a word document, google planner, or whatever tool you have. Write all the goals you may want to achieve.
Let’s not lie to each other. It’s not possible to buy a Ferrari in one year if you make about $300 a month. That’s not realistic. To set a realistic goal, look at what income you receive and make a budget out of it to find how much you can save a month for the car.
If you want to pay for your 500 dollar loan, you can also set realistic figures to be paid weekly or monthly.
Have a Two-Way Expectation
When you set your goals, you may picture yourself driving your black Chevrolet or staying in that beautifully made mansion. You are right. That is possible but you’ll have to lose something else. Ramsey from the Ramsey show quoted that if you win in one area, you can end up destroying the other areas.
For example, if you decide to increase your working hours or get a second or part-time job, you’ll have less time for your family and this can lead to some serious consequences. You need to plan on both sides to succeed.
Categorize Your Financial Goals Into Short-Term, Mid-Term, And Long-Term Goals
You cannot achieve all your goals at once. Some goals will take 10 years to achieve while others will take 2 weeks or 3 months. So, can you categorize the written goals into three categories? Goals like buying a car or building a house can take time, hence you can categorize them into long-term or mid-level term goals depending on your income level.
Goals like travel or buying a bike or smartphone need a small amount of money and time to get them, hence can be categorized into short-term loans. The prices and quality of these items will however vary. If you need a smartphone worth $1,500 and your income level is a bit low, you’ll have to categorize this as a long-term goal.
Prioritize the Short-Term Goals
Let’s say you have two goals in mind. First, you want to buy a bike for exercise or just ride around to a nearby store and secondly, build a house. All these goals are great and achievable. But which goal do you think you should aim for first? You'll go for the bike first since its price is lower and it's easy to get.
This choice can be done for any goal you have. If you have two or several financial goals in mind, it’s better to take care of the short-term one first as you keep planning on the mid- or long-term one.
Have SMART goals
Has someone ever told you that you are smart or you look smart? How did you feel? Great, right? That should be the same case with your goals. Your goals need to be SMART.
Michigan State University study shows that 76% of people who have set specific goals and actions successfully achieved them. That sounds like a good motivation to work on your goals, right? So let’s figure out how to make those SMART goals.
Set Specific Financial Goals
Don't just say you want to save, buy a car or build a home. That is a vague goal. What do you want to save for? Is it for travel purposes, school fees, or business investment? Do the same thing with the car and the house. Get a specific type of car you want to buy or a specific house model you want to build.
Setting specific goals will act as a motivation for reaching them.
Set Measurable Financial Goals
What are measurable goals? They are goals that can be measured or have an amount put to them. After deciding on the item to save for or the type of car to buy, get to know what their prices are. Keep in mind that the prices can increase or decrease in the future.
It's better to put the prices at a higher amount to avoid cases of deficits.
Make the Goals Attainable
Making financial goals attainable means it is easier to reach them. For example, you want to clear your debts. How are you going to do that? If the loan is short-term, for instance, in 3 months. You can decide to cut out some costs or get a second income source to clear them.
If for instance, you want to buy a car, what will you do to get that car? Will you increase your savings, sell your old one and add extra money for a new brand? In short, what will you do to reach your financial goals is what makes them attainable.
Get a Time-Bound for Your Financial Goals
When do you want to buy your car or pay off your debt? Setting a certain time will increase your motivation to get them.
Prioritize The Needs First
You may be having several short-term goals in mind that you don’t even know which one to tackle first. The solution is to categorize the goals first into needs and wants and prioritize the needs. The needs are the goals that are essential and that you'll face some dire consequences if you lack or do not satisfy them.
For instance, loans should be categorized into needs. This is because of the interest and deadline for payments. Your child's school fees or medical attention should be categorized as a need. On the other hand, items like a TV or a quality smartphone can be categorized into wants and they should be satisfied after the needs.
Conclusion
Financial goals are the key factors for success. Learning the best tips to set and reach them is essential.
