Setting money goals is the first step toward enjoying financial freedom and living the life of your dreams. Do you work hard but don’t seem to get anywhere? Are you tired of living paycheck to paycheck? You know that you should be a wise steward, but do you feel like your money is controlling you rather than the other way around?
A lack of financial goals is the main reason people experience money problems and if you want to change your financial future you must learn how to manage your budget and set goals that will put you on the right track.
We all have dreams, but the difference between those who achieve their goals and those who do not is the ability to determine what they want from life, create a plan of action, and stay focused until they realize success. They keep their eyes on the prize and persevere because they know that the end result is worth the sacrifices.
Money management, not income level, is the key to financial success. Taking responsibility for your financial life and learning to set money goals that will give you a sense of purpose and mission is the foundation for building a strong financial future.
Why Set Money Goals?
Without goals, you will wander aimlessly, lacking purpose and direction. The same is true when it comes to your money. If you don’t know what you want to achieve financially, you will make decisions without thinking about the future. Goal setting offers many benefits that will bring your life into focus and help you achieve the financial future of your dreams.
1. Goals are an effective tool for planning and thinking of the future. Setting a goal means you are no longer living only for the moment, but you are looking at your financial situation in terms of where you are now and where you want to be in the future. Where do you see yourself in five years? What do you have to do to get where you want to go?
Many people adjust their lifestyle according to their income, so if they get a raise they simply increase their standard of living. Goals will help you put your spending into perspective so you can use this extra money to increase your savings, build wealth, and work toward those things that are outlined in your long term plan such as retirement, a vacation, college funds, or getting out of debt. Thinking about the future can create excitement that will motivate you to pursue your dreams and turn your ideas into reality.
2. Goals provide motivation and momentum. To stay focused, it is important that you set a goal that is significant to you – something that you think is worth achieving. For example, having money simply sitting in a savings account may not matter to you, but paying off your bills so you can afford to purchase a boat or new car may keep you motivated to work toward getting out of debt. In other words, do not only define the goal but identify the ‘why’ because this will give your goal purpose and meaning.
Outline the benefits that your goal will bring such as freedom, less stress, a vacation, and the ability to start your own business, or buy a new home. This way, when you get discouraged or feel frustrated because you have to give up some luxuries such as eating out or entertainment, you will be able to look at the bigger picture and be motivated by these advantages. Goals give you a sense of mission and allow you to realize that all of your efforts and hard work have purpose or meaning.
Breaking your large-scale goals into smaller mini-goals will allow you to keep the momentum going because you can see what you have accomplished and be encouraged by these successes.
3. Goals will help you gain control of your budget, finances, and life. If you are struggling financially and have no goals or direction for your budget, then you are essentially being controlled by your money instead of allowing your money to work for you. If your finances seem out of control and overwhelming, then setting reasonable, attainable goals can help you design a plan that will make your budget more manageable so you can regain control of your money and begin the process of getting out of debt. Imagine the freedom you will feel when you can once again decide how to spend your money and be able to use it to achieve your dreams and make a difference in the lives of others.
4. Goals will help bring balance and enjoyment to your life. By setting goals you will know exactly where your money is going so you will eventually reach a point where you can pay your bills, save money, and be able to have fun without going into debt. Financial struggles can be stressful, but defining clear goals can help you balance responsibility with enjoyment which will benefit your overall health while also ensuring your financial security.
5. Goals will provide clear direction. Essentially, goals are a road map that will lead you to your destination. If you don’t know where you are going, your spending will have no purpose and you will be less motivated to make the sacrifices necessary for financial freedom. Goals also force you to define your priorities and possibly make lifestyle or value changes that will facilitate the achievement of these dreams. When you are tempted to make a purchase you will have to ask yourself, “How will this affect my goal and is having this item a priority in relation to my goal?”
Tips For Goal Setting To Achieve The Financial Future Of Your Dreams
1. Look at your spending patterns. The first step in creating money goals is to look at your current financial situation and find out where your money is going. How do you use your money? Do you buy things you can’t afford? Do you feel the need to ‘keep up with the Joneses’? Are you an impulsive spender? By looking at your money habits you will be able to identify excessive spending and find ways to cut back. Many people are actually shocked when they study their spending patterns and realize how out of control their finances are. Setting goals will help you plan your spending so you are always aware of where your money is going and will be able to increase your saving power.
2. Create a budget. Many people do not have a monthly budget that lists their financial obligations. It is important that you are aware of all your expenses and how much of your income is designated to these bills. You need to live within your means and account for every cent you spend. Taking responsibility for your finances will help you achieve your goals and enjoy a secure future. Once you get your budget under control and have a good understanding of your expenses, then you can begin setting a little aside into a savings account that will help you meet your longer term goals.
3. Set both short term and long term goals. Your long term goal is the big picture, the ultimate result that you are hoping to achieve. But, sometimes this overall goal can seem overwhelming, especially if your finances are a mess. In order to be successful, break this larger goal into smaller ‘short term goals’ that are more attainable and will make you feel like you are reaching important milestones along the way. For example, your long term goal may be to become completely debt free, but this can seem like an enormous task. To make things simpler, set a shorter term goal of paying off one credit card by a certain date, so that you feel like you have accomplished something toward your bigger dream.
4. Put your goals on paper. Writing your goals down is a way of clearly defining them so that you know what you want to achieve and can monitor your progress to increase your chance of success. Put a copy of your goals where you can see them and read them regularly, maybe even including pictures of what you are hoping to purchase when you become debt free. Putting your goals on paper is a way of making a commitment and creates accountability, especially if you share your goals with family and friends. It makes the plan clear, gives you direction, and will help you stay on track.
5. Make sure your goals are specific. Many times people fail because their goals are too broad or too general. It is important to know exactly what you are wanting to accomplish so that you know when you have reached your goal. For example, don’t say, “I want to save money this month”, but rather, “My goal is to save $200 this month.” Make sure your goals are realistic. Long term goals may seem overwhelming, but you should be confident that your short term goals are attainable. If your monthly budget will not allow you to save $200 then it would be counterproductive to set this goal. If it is not reasonable, you are setting yourself up for failure before you even begin.
Finally, your goals should be simple. If they are too complex, you are more likely to give up. For example, if you are wanting to save $200, purchase a new washing machine, and make a double payment on your credit card, you will probably put yourself under a lot of stress. By setting a simple goal, or choosing one thing to focus on at a time, you will know how to concentrate your efforts and will be more likely to succeed. Remember, success is a step by step process and you can do anything if you approach it one step at a time.
6. Write down the benefits of your goal. The purpose of money goals is to help you achieve the financial future of your dreams, but getting from where you are to where you want to be is not always easy. By reminding yourself of the benefits, you will be able to persevere through the sacrifices, setbacks, and discouragement you may face along the way.
7. Identify the obstacles of your goals. Often people give up before they realize success because they are not prepared for the difficulties they may encounter. Remember, changing your financial future can be a big task and requires both discipline and patience. By being aware of some the obstacles you might face, you can come up with a plan that will help you overcome so that you are not distracted from your goal.
8. Outline a plan of action. Once you have determined your goals, you must come up with a plan to achieve these goals. Simply knowing your goal is not enough. Many people don’t realize their dreams because they never take the steps necessary to make their dreams a reality. Your goal will help you define your course of action and come up with strategies that will turn your ideas into something reachable and attainable.
Remember, your goals are specific so your plan of action should also be specific, with reasonable time limits, measurable results, and clear steps. Design savings and spending plans, outline direction for each day, week, or month, and make sure that your spouse or other family members living in your home understand the plan and their role in it.
9. Educate yourself. Educating yourself on money management and smart investments will give you control over your money and allow you to secure both your future and your retirement. Consult a financial adviser, talk to successful friends, read books, or take courses. By setting educational goals you are preparing yourself to make wise choices in any financial climate and ensure that your money is always working to your advantage.
10. Make sure you have support and accountability. Setting money goals is only the first step – achieving those goals takes a lot of hard work and discipline. To increase your chance of success you should enlist the help of family, friends, or a professional who can help keep you accountable and encourage you throughout the process. They will also be able to help you evaluate your progress and point out any areas where you may be going off track.
Goal setting is the first step to success in any area of your life. By learning how to set money goals you will gain control of your life and be able to secure the future of your dreams.