Setting financial goals is necessary for any person, regardless of the field of activity or income level, who wants to systematically move his life and career up. The maximum to which a person who does not set goals is doomed to stop at the same financial, personal and career level.
Let’s find out how to correctly draw up financial goals, what they are and how they are achieved.
Defining the task correctly is half the matter. Surely you have seen at least once in your life how a step-by-step business literally burns in your hands, leaving no chance of failure. It’s the same with personal goals.
Here are some important theses of goal setting:
- a goal is a measurable and concrete result of an activity. “I want to be rich” is a bad goal. “I want to make $ 1,000,000” is a good goal.
- there are financial and material goals. For example, “I want to make $ 1,000,000” is financial, and “I want to buy a XXX TV” is material. In order for a material goal to become measurable, it must be equated to a financial goal through an equivalent, that is, “I want to buy a XXX TV set for $4,000.”
Often people set goals in the following way – “going on vacation with the family next summer” or “saving for a secure old age.” But this definition is not specific. How much do you need: $40,000? Or maybe $140,000? Or even $1,400,000? If you don’t know, then nobody knows.
Date for goal achievement
Depending on the time required for the achievement, the goal may be:
- short-term – up to 1 year;
- medium-term – up to 5 years;
- long-term – from 5 years.
The best time to set short-term goals is the beginning of the year. For most people, considering the calendar year as a reference period works best. Therefore, in December-January you need to think about what you want to achieve and write it down. For example, like this:
- April-May: buy a new computer ($3,500);
- July-August: go on sea vacation ($9,000);
- September-November: renovate the apartment ($17,500);
- Total: $30,000.
There are all the signs of a correct list of goals: exact amounts, achievement timelines, sequence of actions. The list can be supplemented at your discretion by adding sub-items, an accumulation schedule and other items. But it is very important that it remains simple and straightforward.
Medium-term goals are set for the next 3-5 years. In most cases, these are large purchases related to transport and real estate, the accumulation of capital for business or other purposes, creating a financial cushion and saving money for children’s education. In general, here you need to act in the same way:
- keep in mind what you want to achieve;
- form a list;
- calculate the equivalent;
- define the stages.
As a rule, long-term financial goals coincide with medium-term ones, but take more time to achieve. In addition, pension savings are often added in the long-term goals. The impressive planning goals pose some challenges, as a number of events can occur that affect achievement. At a minimum, calculations should be made taking into account potential inflation. But even with poorly predictable factors, long-term financial goals are effective if you keep touch with your goals.
How to plan and achieve goals?
Many people know that a spreadsheet in Excel or a list in a day planner looks very convincing, but in practice, achieving financial goals is a tough process. Success depends not only on the correct definition of tasks, but also on behavior and daily habits. Here are some tips to help you.
Not use multitasking. Undertaking a large number of goals at the same time is difficult. It will most likely be difficult to keep things under control. You will get tired and may not complete any of them. Pick a few top goals that you can focus on and work towards them. The rest will wait for their realization or lose their relevance.
Balancing time and quantity
It is logical that a large goal requires a large investment of time and effort. It is better to have no more than two global medium-term or long-term goals. Realize 2-3 small financial goals at a time.
Anyone who tries achieving a specific goal acts more efficiently if he sees progress. This motivates, it convinces of the success of what is happening. Therefore, goals with any implementation deadline must be broken down into stages, and after passing them, the task must be revised and new steps determined.
Long-term planning is difficult. Goals that seem realistic and well-planned today may become non-realized in a year or two. Personal or family situations are affected by job loss or change, maternity leave, layoffs, childbirth and macroeconomic factors.
But don’t give up on goals that have become unnecessarily complex. It is important to continue to implement them while making adjustments.
Fixed goals accounting
Correct financial goals are fixed goals. It doesn’t matter where: in a smartphone, diary, computer. You can try to keep and inspect them in your head, but practice shows that most do not cope with this. In addition, the real picture of the process is distorted: the remaining time, the current progress, the stages completed, etc.
Nothing affects a person’s monetary confidence and success like a set of financial habits. Deposit $500 to your savings account with the bank if you decide to do so, no matter what happens. At the very least, try to do your best to follow this habit. Postponement with comments like “Now there is not enough money, next time I will put twice as much” kills all progress. If follow this habit, soon it will become a real easy and natural process.
For many, the practical implementation of the steps presented in this article is difficult. They believe that the financial goals are too large, and the current situation simply precludes their implementation. Don’t be alarmed. The numbers and deadlines may sound impressive, but they are definitely possible to be realized. Start with a few short-term goals. Define them, set deadlines, create a plan, and see how it progresses. After completing small tasks, move on to larger ones.