One of the biggest issues I see with families is not knowing how to set perfect financial goals. Goals need to be specific and measurable, as well as what is best for your situation. Don’t get me wrong, I love having big goals. My husband and I have some pretty big dreams and goals that we are working towards, but the first step with any goal is breaking it down into smaller ones.
You can watch this video online or below to learn more about creating the right financial goals for your family.
Creating the right financial goals doesn’t have to be complicated or overwhelming. You just have to do some research to know how much you can afford each month and how much the final goal is going to cost you.
For instance, if you want to save money for a down payment on your dream home that’s great. However, it can be overwhelming to say I want to save 20% of a $200,000 home – that’s $40,000 you’re trying to save. When you look at $40,000 that can feel almost impossible, which is why so many families struggle with the paycheck-to-paycheck mentality. You see a big number and are immediately discouraged. You result in giving up before even trying.
Instead what you should be doing is setting your $40,000 goal with a realistic time period. For example, you want to save 20% for a down payment and you would like to do it in 4 years. Well now you need to save $10,000 a year or $833 a month. Once you see the smaller number it becomes much more manageable.
BUT if that smaller, monthly amount is still too high then there are a few options you can pick from. First – spread out your goal. Instead of 4 years, try 5 years. Now you’re talking about only $667 a month to reach your goal.
Second – re-prioritize your goal. Do you really want a $200,000 home? Can you reduce any current expenses so you can put back even more towards your goal?
It’s all about making your goal more manageable and then having an honest conversation with yourself and your spouse. Maybe you realize there is a better option than a $200,000 home – perhaps you could get $150,000 home that’s a bit more out of town so it’s the same size. Or maybe you realize you don’t need a new car every 3 years and can work on paying off your car loan so you can have more spending cash each month to put towards your goal.
I’ve been talking a lot about a house, but your goals are anything you want to accomplish. A vacation, a new car, buying a boat, saving for your children’s college costs, remodeling your home, etc.
To set the right financial goals you need to make sure you are following this formula:
- Decide on the final amount for your goal
- Decide on a time frame to reach your goal
- Break it down into a monthly (or weekly) payment
- Re-prioritize your goal if it’s not feasible to save that amount or reach your goal in that time frame
- Don’t be afraid to re-evaluate because goals change with time