On the surface, setting financial goals seems simple. We all have some common goals we’d like to achieve one day. Buying a house, retiring comfortably, putting our kids through college and finally travelling to desired destinations. The challenge however, is setting realistic, attainable and measurable goals. The goals you set must be broken up into monthly, weekly or daily parts, which make your success within an easier reach. Here are a few tips!
1. Plan for the worst, work for the best
Short of winning the lottery or falling into a pool of money (or stealing someone else’s) setting a retirement goal of five million dollars in the next three years, while currently earning $35,000 is simply not realistic. And that’s OK. Just be sure to start thinking in relative terms – what can you realistically save over the course of a year without over-taxing yourself. Don’t assume you’ll get the raise you deserve; plan for the worst but work hard for the best.
2. Separate your goals into blocks of time
Separate your goals into short-term, medium-term and long-term blocks. By doing this, you’ll create a clear path for yourself that helps keep you in check every step of the way.
- Your long-term goal is to have children and buy a house in approximately 5-10 years. For that you estimate you will need $40,000.
- In the meantime, your medium-term goal is to buy a condo with a $15,000 deposit. The plan is to sell the condo after three years and to use any profit from the sale as part of the down payment for the house.
- The short-term goal will be to earn $15,000 in about two years. You need to start saving at least $625/month, through either earnings or other sources of income.
As you can see, your short-term goals need to include specific steps in order to help you reach those longer ones.
3. Quantify everything and set a date
Your goals should be as focused and specific as possible. Rather than wishing for a nice car in the next
few years, determine to buy a $40,000 car in 3 years. This will make calculating goals and analyzing your progress much simpler. You can break up the financials into small intervals of time, and budget according to your income. Even saving $25 a week can feel a lot less heavier than $100 a month.
4. Don’t forget what you owe
When talking about the future, it’s easy to forget about the past. Those credit card debts and personal loans don’t care about your goals – they’re not going anywhere. Factor them in when deciding what you want from your financial future. In fact, before you come up with any other financial goals, your primary one must be to get rid of your debt. There is no point in earning 7% on your investments if you are paying 21% monthly interests towards your debt.
5. And finally, the golden rule: Don’t lose sight of your goal
Jotting things down is one thing – living them takes commitment, and possibly a few sacrifices. Re-visit your goals often to strengthen your resolve. Don’t feel disappointed if you have to go back and revise your plan, because there’s no such thing as a perfect road to success, it takes time, determination, trial and error and of course, lots of patience. Don’t ever underestimate the short-term $100 or $500 goals, that will ultimately lead up to the thousands and (fingers crossed) million dollar goals. So, to recap, follow the steps below to create and meet your financial goals:
Five steps to creating and meeting your financial goals
- Set your goals: Write down your financial goal(s) as clearly as possible. Use amounts and dates. Ex. “I will save $10,000 by April 2014.
- Start tracking: Use an excel sheet or a online tool like mint.com or Quicken to plan out your income and expenses
- Define how much you can save: Using one of those tools, find out exactlyhow much you can realistically afford to save
- But, Don’t forget your debts: Don’t forget to include any and all debts in your calculations. Getting out of debt is critical to your financial future.
- Review and readjust: Get in the habit of reviewing your finances at the end of every month. How much closer or farther are you from your goals.
About Robert Gelber:
Robert runs marketing at Wall Street Survivor and is on a mission to reinvent the way personal finance is taught. While he graduated with a finance degree from McGill University in Montreal, it quickly became clear to Robert that classrooms are often not the most efficient way. In 2014 he joined Wall Street Survivor, the web’s most popular fantasy stock market game, to disrupt the way financial education is acquired.