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Setting Personal Financial Goals

Personal financial goals help you see the big picture – how you want to live your life – and motivates you to take small steps to get there. I don’t know about you, but I tend to drift through life if I don’t set goals for myself. It’s not that I’m lazy or unmotivated, it’s just that I’m fascinated by so many things that draw my attention easily from one direction to another. That’s not a bad thing, but it does inhibit my ability to master anything.

Goal-setting helps me focus and gives me direction, and financial goal-setting has made me able to quit full-time work so I could moneyyyyyyyytravel and write and enjoy retirement with my husband. So what is financial goal-setting, and how can you make it work for you?

Setting and reaching your financial goals may very well help you achieve your other life goals. Do you want to retire at 50? Live in a house by the lake? Pay for all your kids to go to college? Set up a business of your own? Downsize and vagabond around the world? These things don’t happen out of the blue. It takes deliberate steps to get there. But you can do it. Here’s how.

Write it Down

Consider all that is important to you in your life. Where do you want to be and what do you want to do? What does financial security look like to you? Everyone’s definition will be different. You have to decide what that means for you. Now, write it down. Draw a picture of it. Put it on paper somehow. Just writing down your big-picture goals will make them more concrete and will fix those goals in your mind.

Chunk it Up

Next, break down your big goals into smaller chunks. A 10-year plan, a 5-year plan, a 1-year plan, a 6-month plan, a weekly plan. You might want to create one plan for housing, one for transportation, one for education, one for retirement. You decide. Just be sure to write this plan down, too. I once had a goal to be able to pay cash for my next new car. That was a big goal, so I calculated how much I’d need to save each year and then each month to make that happen. Then I put that much away in my car account each week.

Give Yourself Deadlines

Big goals and short-term plans are useless without deadlines. Put dates on your plans. It adds a little pressure but provides real, concrete incentive for sticking to your savings plan. If you don’t quite reach your goal on your deadline date, don’t sweat it. Just re-evaluate your plan and your behaviors and get back to working on it.

Start With a Goal That Excites You

You will end up with several plans and smaller goals that help you get to your big picture goal. To start, choose the goal that really gets you excited. Make sure your first goal is achievable – something you are sure you can do. Every victory along the road to the big picture will motivate you to keep going and will multiply your success rate, inching you ever closer to your own financial security.

Be on the Same Page

You and your partner need to agree to the same goals if you are sharing your lives and financial resources. Having one partner hell-bent on saving for a house while the other is content to rent and spend money on concerts and beer is certain to lead to relationship disaster. Figure out what your common financial goals are and be sure both parties are committed to the action plans you develop.

Automate Your Savings

Whenever you can, enroll in savings or retirement programs that automatically deduct funds from your paycheck or from your bank account into a retirement account. According to economics professor Richard Thaler and law professor Cass Sunstein in their 2008 book “Nudge: Improving Decisions About Health, Wealth, and Happiness,”  this kind of savings strategy drastically increases participation and success.

Stay Happy and Focused

Financial goal-setting can help you realize the life of your dreams, but don’t let it add stress to your life. Take a deep breath, relax, start with a small goal, stick to your budget, watch your savings grow. Soon your goals will become reality and that life you envisioned will be yours to enjoy.

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