This was meant to post yesterday, but I apparently got my dates mixed up and it was pre-scheduled for today. The Money Drain is participating in Women’s Money Week. Today’s topic is “Goals and Taking Action”.
Goals are an important part of personal finance. Truth be told, they are an important part of successful living. A friend of mine often quotes me: “Prior Proper Planning Prevents P*** Poor Performance“, and it really is true in many facets of life.
Benefits from Setting Goals
1. Debt Prevention. When you plan ahead for things like new tires for your vehicle, a new appliance to replace one that has been giving you trouble, or college savings, you prevent opportunities for you to end up in debt. If you did not plan ahead for expenses that you knew were coming, then you are likely to try to make up for them with a credit card when one of your tires blow, or the fridge gives out.
Keeping up with things you know you’ll need to spend significant money on helps prevent you from having to do so forcefully with debt.
2. Moderation and Budgeting. Goals allow us to work within a planned time-line and sum, which helps us to moderate our spending habits. If I have a goal to pay off my car within 2 years, then I know the amount of money I’ll need to work with to make that happen. That money, in my mind, should be untouchable and reduce the available funds I have for other things. Hence this is moderating what I have to spend on things I don’t need.
3. Motivation. Goals give you an automatic “Point B” to strive towards. You have a focus now, perhaps even a timeline in which to achieve your goal. Keeping this goal in mind in the back of your head will help determine future decisions on where your money goes so that you can continue working to reach “Point B” without getting off-track.
Getting Started With Your Financial Goals
1. Start with a list. Start writing down a list of your financial goals for the next 5, 10, and 20 years. Prioritize by which ones are important to you, and which ones are important to be done in general. Which ones can you work towards simultaneously, which ones will have to be delayed until others are completed? Once you have a basic idea of how you want your finances to play out over the next 20 years, you’re able to tweak and fluctuate them as things in your life change.
The main important thing is to be realistic with your goals. Give yourself grace periods, and don’t beat yourself up if you miss one. Most things don’t always go as planned, but having a plan allows us to get back on track. Little word of wisdom from yours truly 🙂
2. Make sure you create little goals/milestones. A sense of accomplishment is your biggest motivation. It’s great to have a lot of big goals you want to accomplish, but set some little ones too, and ACKNOWLEDGE them. Celebrate when you complete something, you’ve earned it, and you’ll feel great about starting on the next goal/task.
Timelines are very important because they help you measure progress. Without them you don’t really have an idea on whether you are doing what you need to do. How many times have I said to myself I wanted to learn Spanish “someday”. Someday hasn’t happened yet, because I haven’t set a goal on when I want that to happen.
3. Create a Plan of Action. Now that you have your goals and “milestones”, start creating a plan of action. If you feel too overwhelmed by the sheer volume of goals and/or debt, then start small. Knock them out one at a time, and just move down your list.
What can you do to help reach this goal? Do you need to find an extra $50 a month somewhere? Where can you reduce your monthly expenses by $50? Here’s an idea on how to create your first plan of action:
- Identify your goal/milestone you want to achieve
- What time frame do you want to complete it by. 6 months?
- How much money would you need to complete it within 6 months. Divide that by 6 so you have a monthly figure you need.
- Can you reduce this amount from your monthly expenses? Take a look at your expenses very closely and be disciplined. Get rid of the coffee budget 🙂
- If you can pay this off just by reducing expenses, stick to it and you’ll hit your goal!
- If you can’t pay this off by just reducing expenses, do you have anything to sell? Jewelry? Electronics? How much can you make from things you don’t use in your home to help you achieve your goal?
- Don’t have things to sell? How about taking on side work?
- If you can’t take on side work, perhaps we should extend the deadline for this goal to be more realistic with what we are capable of.
4. Review your goals every couple months or annually. It’s always good to do a financial “check-up” to make sure things are in a place you are comfortable with. You don’t want to be hit with any surprises that could have been prevented by a little review. Are the tires due to be replaced? Lets check on that every other October and create a plan for saving up $500 every two years for tire replacements if needed.
5. Modify Goals as needed. It’s important to be disciplined with your goals, yes, but it’s also important to acknowledge that things will come up. You may have an addition to the family that you didn’t account for. These will likely require goals to be changed, which is why it is important to #4, review your goals regularly. Be flexible and diligent at the same time.