Setting realistic financial goals is what separates the successful from the unsuccessful. Goals are good for every area of life, but setting financial goals specifically is important. The process of setting goals is just as important as having them, so let’s look at what it takes to set realistic and effective financial goals.
Determine Your Goals
Just like with any goal, a realistic financial goal needs to be specific, attainable, and written. Setting a goal for an amount or a time period that isn’t realistic will only hurt you. It is very important that you write a specific goal, including all of the numbers involved.
All goals should be written.
Goals should also be few in number. You should set a few highly specific goals.
Goals should be S.M.A.R.T. (Read about S.M.A.R.T. goals here)
You’ve probably heard the popular statistic: only 3% of people write their goals down, which says something about the small number of people who stick with goals and achieve them. Putting goals in writing holds you accountable to the goal.
Separate Your Goals
When setting realistic financial goals, it is important to separate them into lengths. Short-term and long-term are necessary, but it’s better to be even more specific. You need a written goal for these time frames, at a minimum:
3 Month | 6 Month | 9 Month | 1 Year | 3 Year | 5 Year | 10 Year
Keep going! You can have goals that last the rest of your life, and you should. You’ve probably heard, “If you fail to plan, you plan to fail,” and this is very true in finances.
Build Your Goal
You must include what, how, and when to have a specific financial goal. What will you accomplish? How will you accomplish it? When will you accomplish it? Here is a great example of a goal:
This goal is specific, realistic, and attainable. If you earn $10 per hour working 20-25 hours per week over 6 months, you can earn $5000. This goal can be achieved, but if something changes, it could change too, which is why reviewing your goals is important.
Review Your Goals
It is important to look at your goals at least once a month. Review them and determine which goals you have accomplished. You may also need to change some goals or timeframes. If you are realistic, you can tell when a goal will not be achieved. Be honest with yourself. It’s important to change your goals or timeframes so that it is possible and reasonable for you to accomplish them, but if you are realistic when setting the goal, you shouldn’t have to change them often. Goal setting and achieving are all about discipline and perseverance.
Resources:
Goal Setting Worksheet – Simple worksheet to get your goals on paper.