While many personal finance articles talk about the importance of building up your savings and creating a budget, not a lot of them talk about what to do after you’re finished with those tasks.
That’s where financial goals come in. Setting effective financial goals and achieving them is the final pillar of financial success. It’s also a part of financial success that can be overlooked. Fortunately, setting financial goals isn’t hard.
It’s Time to Dream Big
Your first step in setting up financial goals is to think about your life goals and how you want to achieve them. There are no right or wrong answers to this goal setting exercise, this is to help you determine your priorities so you can begin making a plan for your big-picture money goals.
Example financial goals can include things like:
- Buying a sports car
- Saving for a nice house
- Getting married
- Paying off debts
- Having a nice retirement
- Start your own business
This can be a fun process. Sit down somewhere with a pen, some paper and your favorite beverage, then just think about all the things you’d like to do in life. Write down all the ideas you come up with. This an also be a great goal setting exercise to go through with your partner.
At this point, don’t worry about whether these goals are achievable. This is your chance to dream big. Also, don’t worry about what other people say—these are your goals for your life.
Now that you have several life goals, it’s time to make them actionable. That means making them S.M.A.R.T. In other words, your goals should be:
- Specific—do you have a clear idea of what your goal is?
- Measurable—will you be able to track your progress?
- Attainable—do you know how you can achieve your goal?
- Realistic—can this goal be achieved?
- Time-Bound—when would you like to have achieved this goal?
For instance, let’s say you’ve decided one of your life goals is to travel. Your first step is to list a specific place you’d like to visit, such as Paris.
Once you’ve specified your goal, figure out how you’re going to measure your progress. One way to do this is by estimating how much a trip to Paris would cost, then writing that number down. You’ll then be able to track your progress by putting your money in a separate savings account and seeing how much money you’ve been able to put aside toward your goal.
Next, figure out if your goal is attainable. If you’re going to go to Paris, you’ll need to figure out how you’ll be able to save money for the trip. Can you bring in additional money you can devote to your goal, or will you cut back on spending instead and put the money you save toward seeing Paris?
After you’ve figured out if your goal is attainable, make sure it’s realistic. While this does mean making sure it’s a goal you can accomplish, you’ll also want to make sure the goal fits with your life. If you have children, for instance, you’ll want to consider whether they’ll be okay with flying, whether you’ll be able to keep an eye on them in another county, and if you can afford the added expense.
Finally, make sure your goal is time-bound. In other words, set a timeline for when you would like to achieve your goal. For instance, you want to have enough money saved up to visit Paris in three years.
It’s important to note that if one of your goals doesn’t fit the S.M.A.R.T. template, you shouldn’t give up on the goal entirely. Instead, think about how you could alter the goal to make it S.M.A.R.T.
If you realize that you can’t visit Paris because you can’t afford to take your family along, for instance, perhaps you can give yourself more time to save money. You could also figure out how to save more money from each paycheck, or even alter your travel destination to somewhere in the United States you’ve never been, such as Niagara Falls, the Grand Canyon or Yellowstone National Park.
Choose Your First Goal
Now that you have some S.M.A.R.T. goals, it’s time to select which one, or ones, to work towards. You can choose any goal you’d like, but if you’re new to financial goals you should start with short-term financial goals, like setting aside $1,000 to buy a new couch.
If you’re more comfortable with financial goals, think about the ones that are most important to you. Maybe you need a new stove, or maybe you want to make sure you have enough money for your retirement.
No matter which goal you pick first, make sure you have a plan in place to achieve it. You should already have an idea of how you’ll achieve your goal, thanks to the work you did in the “attainable” phase of the S.M.A.R.T. goal planning, so now is the time to flesh it out. Figure out how much money you can set aside each month to put toward your goal, then set your plan in motion and stick with it.
Achieve Your Financial Goals With First Alliance Credit Union
Once you’ve created a budget you can take the next step toward financial success by setting some financial goals. Take some time to figure out what your financial goals are, then make those goals S.M.A.R.T.—specific, measurable, attainable, realistic and time-bound.
You can also make achieving your financial goals easier when you become a member of First Alliance Credit Union today. You can take advantage of the free downloadable S.M.A.R.T. goals guide (back at the top of the page), and you can open up a savings account or money market account to save for a longer-term financial goal.