How to set financial goals and reach them!

how to set financial goals

I love, love goals.  They push us to better ourselves.

To reach for the stars and dream big.  The problem with most goals is that people don’t create a plan for them.  You have to have a plan to reach your goal.

I want to be the best ballerina in the world.  

That’s a goal.  In reality, I have never taken one dance lesson.  I’m too old to learn world-ranking skills and I’m way too out of shape to even try.  See, I don’t have an effective plan.

I want to have $5,000 in my savings account within the next 3 years.

That’s another goal.  I will find an extra $140 every month I can put back.  I will continue to set aside money until I reach my goal.  That’s a plan.  I can reach my goal.

There are 4 rules that can help teach you how to set financial goals that you have to follow:

how to set financial goals

Rule One: Make it realistic.  Know your spending habits by creating a budget.

You have set a goal of saving $20,000 in one year for a down payment of your first home.  You only make $30,000 a year.  Your goal is not realistic.  There are exceptions – you live with little rent cost and food costs.  If that’s the case, then perhaps you can put back ⅔ of your annual salary into savings.  I doubt it.  That’s not reality for most people.

A more realistic goal is to put back 10% of your earnings each year.  So if you setup your bank to automatically transfer 10% of your paycheck to your savings account each time it hits.  It’s realistic and very doable.

how to set financial goals

Rule Two: Stay motivated.  You need motivation to reach financial goals.

Create a sheet that hangs on your dresser mirror of what your big goal is.  That way you see it every morning while you’re getting ready.  Your goal stays on the forefront of your mind every day.  It’ll help the next time the girls call because sushi with the girls sounds like a great idea.  But spending $60 on a random Tuesday night will not help you get to your goals.

how to set financial goals

Rule Three: Have a support team around you.  You need people that know about your goals and want to see you succeed.

They can be your voice of reason when you find a super cute dress on sale.  We all know you don’t need the dress, you want it.

how to set financial goals

Rule Four: Set mini goals.  Baby steps are key when reaching for a bigger goal.

They always say don’t tell yourself you want to lose 40 pounds, tell your self 5 pounds.  Then when you hit that goal just say it again.  “I want to lose 5 pounds.”

It’s hard to grasp a big financial goal, like saving $20,000.  You can start to feel overwhelmed.  When you feel overwhelmed then you lose your motivation.  When you lose your motivation you start to slip on your spending.  You’ll lose sight of your budget.  Then you’ll pull from your emergency fund for non-emergency events.

I believe in the cash envelope system.  It can help you stay on track and keep your end goal in sight.  Just make sure to keep saving a priority.  You don’t have to sacrifice a lot to reach your goals, just the unnecessary and unneeded spending has to go.


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