Beginner's Guide To Financial Goals
There are a few different reactions when people hear the word goals. Some people get excited and grab their planner, ready to map them out. Some get a little nervous because thinking ahead like that, in order to set goals, is a little intimidating. What’s wrong with focusing on right now? Others, hear the word and run in the opposite direction because setting goals just hasn’t worked for them and they shy away from it.
Whatever your reaction when you read that word just now, please know that goals are a good thing and there is a right way to set them and accomplish them. Just because goals haven’t worked out in the past doesn’t mean you can’t pivot or try something new. If you’re one of those people who got excited when I said goals, awesome! Let’s dive deeper into goals, what they are and what they are not, and how to properly set them. If you’re someone who considered clicking out of here when I said goals, stick around and hear me out. Goals are the start to possibilities and change.
If the title didn’t give it away, we’re focusing on financial goals. Specifically, financial goals for those who have never set financial goals before. Maybe you’ve told yourself on January 1st that you’re going to start saving money this year, but then situation after situation comes up and you find yourself in March without a dollar saved. I’m here to help you change that this year. Maybe financial goals have never flashed on your radar because we tend to focus on personal goals, family goals, and even career goals, or maybe you’re afraid to set financial goals because money tends to be a taboo subject and you don’t know who to talk to about financial goals. I’m here to help you as I challenge all that thinking. Financial goals are the starting point to creating a path to win with money.
Goals should always have the following attributes: they should be personalized to you, which means they are specific. They should be measurable, which means you can clearly define whether or not you accomplished the goal. They should be attainable. You’re not going to set a goal to climb Mt. Everest if you’ve never hiked the mountains in your own hometown. Goals should also have a time-limit. Make the time-limit realistic but don’t give yourself so much time that you forget you have the goal. Time limits on goals keep us motivated.
If you’re not new to the financial goal setting deal or you’ve already completed these goals, don’t worry, I’ll be doing part two for more advanced financial goals soon.
1. Start a budget and stick to it!
The first step to truly winning with money is to start telling your money where to go instead of checking your bank account and wondering where it went. Just by sitting down and starting a budget, you’ll find extra money that you didn’t realize you had. It really is that simple. You’ll start to see extra money when you’re not constantly spending it and start telling it where to go. This goal is a two-parter because you can sit down and write out a budget, but then you have to make yourself stick to it. That’s why we focus on a zero-based budget. Every dollar has a name, a home, a place to go. When you do a zero-based budget, you don’t have extra money that you are itching to spend. They all have their job. Start putting your money to work!
2. Emergency Fund
When you’re living paycheck to paycheck, the worst thing that can happen is finding out you need $400 to fix something that broke in your car. The $400 triggers stress because you already feel like you don’t have money. That is where this emergency fund comes in. It covers the unexpected in life. It’s your Murphy’s Law fund. Set a goal to get yours started and funded. Keep in mind that this is a starter emergency fund. This is a goal for $1,000 in the bank and the goal is to do it quickly. This is one of those goals where you want a tight timeline to get you motivated to do it. How can you get an extra $1,000? Put some money in your budget towards your savings account. Go through closets and sell things you aren’t using anymore. You’d be surprised how quickly you can save up that $1,000 when you’re motivated.
3. Start a debt snowball
Debt is never your friend. Set a goal to pay off your debt, start a debt snowball and get to work! Getting rid of debt will open you up to be able to set other financial goals, like a retirement fund, buying a house. Maybe even a big-time renovation if you already own your house. Give yourself a realistic deadline to get your debt paid off and take it one step at a time. The timeline keeps you motivated but as you start to knock off the smaller debts, the progress you make toward this lofty goal (the average American has $90,000 in debt, this overall goal most likely isn’t small) keeps you going as well. You see progress as you move forward with this goal. The progress keeps you motivated and going when you start to get weary. The deadline gives you the kick in the pants when you need it plus gives you hope that you won’t always be living this way.
4. Set up sinking funds
This goal is fun because you get to see the money grow. Sinking funds are essentially short-term savings to buy big-ticket items. You can use this to buy a car, or buy a new TV, or that bag that you wanted but was outside of your budget. Instead of waiting until you have $300 for the TV or the bag (or $3,000 if we’re talking about a car) that is flexible in the budget, take $20 from each paycheck for 15 paychecks. Depending on your pay schedule, that could take anywhere from three to six months, but you will see the fund for the item grow as time goes on. You’ll be able to pay cash for the item and not have to worry about the bill afterward. There is something very freeing about buying something without having to worry about the aftermath. You get to get something for yourself guilt-free and enjoy it.
These are basic money goals for those who have never set financial goals before. These are the goals you should be setting for yourself if you want to start taking control of your money. These are the goals for those who are tired of feeling broke and want change. These goals can make change happen. Just make sure you stick to them and while the journey is hard and requires discipline these goals will help you build up the discipline you need to set bigger goals. One day, you won’t have debt, you’ll have a full emergency savings fund and you’ll be at peace with how your money is moving. These goals start to change money from something you avoid into a tool that you use.