Having long and short-term financial goals is a healthy habit that should be part of every financial self-care routine. So what’s the point of having financial goals? In short, setting big and small money goals will ensure that you’re not left saying “I wish I had done that…” in the future.
Maybe you’ve never thought about making financial goals or what you’d like to do with your money later in life. With hard work, focus, and consistency, you can set tangible financial goals and meet or exceed those goals. Here are some tips on how to get started.
First things first
When it comes to money goals, you need to get smart. S.M.A.R.T. is an acronym that stands for Specific, Measureable, Achievable, Realistic, and Time-Based.
Now that you know what a S.M.A.R.T. goal is let’s dive deeper into each category.
When you’re brainstorming your financial goals, be very specific about what you want to achieve. Here are a few questions to ask yourself when you’re mapping things out:
- Who: Who needs to be involved in achieving the goal? For example, if your goal is to pay off joint credit card debt, you’ll need to involve your spouse, partner, parent, or another person with whom you share the debt.
- What: Think about exactly what you’re trying to achieve. Make sure you include all of the details, no matter how big or small, as they can impact how and when you accomplish your goal.
- When: This is question is all about time-based action. If you’re unsure of the timeframe you need to accomplish the goal, you can start with a general timeline (e.g., I want to purchase a home in 5 years, or I want to pay off my student loans in 3 years).
- Where: This question may or may not apply, depending upon your goals and personal situation. If you’re setting a goal that involves an event or specific location, you can include that information here. For example, if your goal is to invest money to purchase a retirement home in Florida, you can add that location to the details of your goal.
- Which: This is where you determine any foreseeable obstacles and qualifications. For example, I want to invest $1500 a month into my Roth IRA. To free up the money needed to invest, you’ll have to pay off other debts first. This step is helpful when determining if your goal is realistic or not. You can always make adjustments as you go.
- Why: What is your reason for the goal? This question is something to ask yourself with any financial goal, regardless of long or short term. How will the goal ultimately benefit your life?
You’ll want to use metrics or data to measure your progress and show that you’re on the path to meeting your goal. Using metrics makes your goals more tangible as it provides a way for you to see your progress and overall results. Consider assigning yourself detailed tasks to accomplish that help you meet your goal, or designate a specific amount to reach by a particular point in time. For example, you’d like to save $5,000 over two years. You can write out a budget to save approximately $208 per month. You can use a calendar to measure your progress by writing down your deposit amount on the 5th of each month, then compare what you’ve deposited vs. the total amount of money you want to save. After six months, you should have about $1250 saved, which is a quarter of your overall goal.
You want to set goals you know you’ll accomplish. This is where you want to focus on how important the goal is to you and what you can do to make that goal attainable. It would be best if you thought about accomplishing the goal and have the right resources, tools, and skills to get there.
You’ll need to consider things like if the goal will require you to change your spending habits, assessing your attitude towards budgeting, or if it requires you to develop new skills of some kind. This step is critical in motivating yourself to keep things moving in the right direction.
Keeping things honest with yourself is one of the most important steps of setting goals. We all want to set ourselves up for success, not disappointment. Being realistic about your goals means focusing on things that make sense for your current financial situation. For example, you can set a goal of paying off $80,000 of student loan debt in six months, but if you only make $3,000 and month, that is not a realistic goal in any sense of the word. Take the time to sit down and think about what it takes to meet your goals and if you’ve set the bar too high.
Anyone can set goals, but if you don’t have an actual timeframe attached to the goal, likely, you aren’t going to succeed. Giving yourself a target date or deadline is essential. If the goal will take 12 months to achieve, knowing what’s attainable and the halfway point is helpful. Setting time constraints also creates a sense of urgency and can help give you an extra push to reach your goal.
S: Plan to save for down payment for a house
M: Plan to save $10,000 total for the down payment
A: I can reach my goal by saving $167 per month
R: I can cancel my Netflix and Disney+ subscriptions, cancel my car wash membership and downgrade my gym membership to make room in my budget and save this amount each month
T: By saving $167 per month, I’ll have $10,020 saved in 5 years
The idea of setting financial goals is to work towards having exactly what you want. Goals should be regularly set and tracked because life happens, and things can change dramatically for better or worse. Remember, your goals can be long or short-term. If you stay realistic about your current financial situation when you’re setting goals and follow these S.M.A.R.T. steps, you’ll be on your way to financial success in no time.
This content is developed from sources believed to be providing accurate information, and provided by Spectrum Management Group. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.