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6 tips for setting effective financial goals

By on March 23, 2021 0

Do you have goals for what you hope to do with your money? If you don’t, there’s a good chance you’ll end up spending your money mindlessly and have little to show for the fruits of your labor. Having a financial plan is essential to achieving great things, but you can’t just do just any old plan – you need to set effective financial goals that you can actually achieve.

Setting financial goals that you are likely to achieve is easier said than done, but there are proven techniques that make success much more likely. If you want the best chance of achieving your financial goals, do these six things when you set them.

1. Only set goals that you really want to achieve

It’s up to you to decide what you want your financial goals to be, but if you don’t really believe in them, you probably won’t achieve them.

If you don’t really want to buy a house, for example, you’re unlikely to be very motivated if you set a goal for yourself. save for a down payment. This is even if you feel the pressure to make it a goal because your friends and family assume that you will become a homeowner.

Take the time to really Think about what matters most to your money and choose a few key goals that you want to achieve.

2. Make your goals specific and measurable

For something to be a goal, rather than just a wish, it’s important that you have a very clear definition of success. In other words, if you want to take early retirement, your goal cannot simply be “to save enough for early retirement”. After all, such a vague “goal” doesn’t really give you anything concrete to work towards.

When setting your goals, be very detailed about what you hope to accomplish, and be sure to define exactly what success means. If your goal is to retire early, that would mean figuring out at what age you want to retire, figuring out exactly how much money you would need to retire, and then deciding. how much you would need to save each month to achieve your goal.

3. Make sure your goals are reasonable

Setting a goal that you can’t reach sets you up for failure and is likely to discourage you from setting other financial goals. As you set specific, measurable goals, make sure you can actually achieve what you set out to do.

That doesn’t mean you shouldn’t force yourself to try and accomplish great things. You can Set goals for yourself that seem a little out of reach if you’re willing to push yourself and go the extra mile. But don’t make your goals impossible. Retiring at age 30 when you are already 28 may be out of reach unless you win the lottery, but you may instead be able to make a realistic plan to retire at 40 if you do. really tie up.

4. Divide big goals into small ones

A lot of the things you want to do with your money are to save what seems like a fortune. Early retirement, for example, may require saving $ 1 million, while even saving for a $ 100,000 down payment may take years.

Instead of setting yourself a big goal that you are miles away from, break your big goal into a series of smaller milestones. You can set a goal of saving $ 20,000 per year for that down payment, for example, or maximize your 401 (k) every year.

By choosing a goal that you can accomplish within a reasonable time frame, you will have the finish line in sight and be much more motivated to surpass yourself than if your victory was only in the distant future.

5. Set a schedule

Whatever goal you set for yourself, you want to have a specific time frame to achieve it, otherwise it might stay on your to-do list forever.

Establishing a timeline for achieving your goals makes it easier for you to track your success to make sure you’re on the right track. It gives you something to look forward to so that you are inspired to meet your deadline. It can also help you figure out exactly what you need to do to reach your goals.

If you know you want to hit your goal of saving $ 100,000 for a down payment for a home within five years, you can work back to determine that that means you will need to save $ 20,000 per year. If that’s not doable, you can adjust your goals, or you can find another way to achieve a goal that seems impossible, like taking a side gig or moving to a cheaper location in the meantime.

Ideally, your deadline for achieving one of your goals should be no more than a few years. If you have a goal that will take a lot longer to accomplish, this is where it becomes important to break it down into smaller goals.

6. Track your progress

Finally, it is imperative that you monitor your efforts to achieve your goals so that you can make adjustments if you deviate from your course. You can use apps or a spreadsheet to track the progress of your savings, or provide a creative way to visualize your success.

If you’re trying to save $ 100,000, you can build a tall Lego tower and add a new section every time you save $ 1,000. Or, you can create a paper string representing the debt you’re trying to pay off and remove a link every time you lower your balance by $ 100.

Whichever approach you take, just make sure you have a way to see your progress so that you can stay excited about your successes as you move closer to your goal – and so you can spot setbacks quickly and adjust yourself.

Setting effective financial goals is possible

Now that you know how to set effective financial goals for yourself, there are no more excuses. Set goals today and start working towards them. You’ll be proud of yourself and happy when you can tick off your goals off your financial to-do list and start doing great things with your hard-earned money.

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