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A goal without a plan is a dream, and statically most Americans are living a financial nightmare. We are not a nation of planners or savers, and I am a part of a movement that does not want to settle for the status quo. More so, I am part of a movement to help inspire others to not settle but rather to live a life of financial freedom. I put this post together to help create a roadmap for those seeking to take their financial life to the next level.
Identifying Your Financial Goals
In order to come up with a workable plan to achieve your financial goals, you need to define them. This will be different for everyone, however here are some of the more common financial goals that people have:
- Pay off all consumer debt, except for my mortgage
- Pay off my mortgage
- Raise my credit score
- Increase my income
- Reduce my monthly expenses
- Build my retirement savings
- Buy my first home
- Buy my first investment property
- Build a $1,000 emergency fund
- Save 3-6 months of my monthly expenses in an emergency fund
- Create a Budget
- Start a side hustle
Once you have identified the financial goals you want to achieve, it is critical that you write them down. You are statistically more likely to accomplish your goals when you write them down, so it is crucial to write them down.
After you have written them down, you also want to prioritize them and see how and of them might work together. This will allow you to maximize your efforts, while not overwhelming yourself and setting yourself up for failure.
Use the SMART Goal Setting Formula
The examples I used above are general guidelines for financial goals. In order for your goals to be achievable, you have to take them from general to specific. There is a common goal setting formula, known as SMART, and it starts with being specific. Here are all of the elements of the SMART Goal Setting formula and I will use my first example to demonstrate how to apply the formula to your goals.
S (Specific) – It’s not enough to say you want to pay off your consumer debt. You need to identify exactly how much consumer debt you want to pay off.
M (Measureable) – Identifying a specific number allows you to measure your progress. If you didn’t know how much you wanted to pay off and did not track how much you were paying off, you would not know if you were making progress or not. While this sounds simple, this is how most people manage their finances and goals – and why most people don’t make progress.
A (Achievable) – One surefire way to not reach your goals, get demotivated, and spiral out of control, is to set unrealistic goals. For example if you set a goal of paying off $100,000 of debt within a year and you earn $35,000, let’s just say you are likely setting yourself up for failure.
R (Relevant) – Your financial goals should align with your life goals. Knowing why you are accomplishing your goals – and keeping that in the forefront of your mind – will help you stay on track with your goals.
T (Time Sensitive) – Giving your goal a date is critical to an effective plan and will help you break the goal down into realistic milestones.
Take Small Steps
There is no shame in taking small steps toward reaching your financial goals. I recall when I started to automate my savings and I did not “see” the money in my budget. I started by automatically having $10 transferred to a separate savings account every two weeks. After realizing that we did not feel the impact of that, I increased that amount a little more. Next, I opened different types of accounts and started those with small automated monthly amounts until we reached the point were we have several hundred dollars per month being automatically saved and we don’t miss it in our budget.
Any goal can be broken down into small steps and those are the easiest to take. As you take these steps, it is important to focus on what you can control. Specifically, don’t get hung up on the fact that you are not where you want to be, but rather get excited that you are making consistent steps towards where you want to be. In fact, focus on the new habits you are making along the way and you will find yourself edging closer to your financial goals faster than you expected.
Some people find that having an accountability partner can help. This can be someone who is in the fight with you or someone who has won the battle you are seeking to win. When it comes to finances, many people feel vulnerable, so it’s important that you choose an accountability partner wisely and make sure it is someone you trust who will truly support you. Some people prefer accountability groups where they can share openly and learn from others. Choose which works best for you.
Hiring a financial coach may seem counter productive if you are having money issues, however a good financial coach can often help you make progress with your financial goals much faster, making their services well worth the investment. If you are looking for a financial coach, feel free to reach out to me and I might be able to assist you or I can refer you to a coaching colleague.
Celebrate Your Wins (No Matter How Small)
It is very important to celebrate all of your wins along the way. If your goal is to save your first $1,000, celebrate the fact that you automated your savings, even if it’s $5 per month. Once you reach $50, celebrate that, then celebrate the next $100, and so on. As a side note, don’t actually go out and spend your money celebrating… at least not until you have a big win to celebrate.
The ultimate celebration will come when you reach the goal that you set out to reach. At that point, you can have that big (frugal) celebration, then look at what is next on your financial horizon and start planning for the next goal along your financial journey.
Life is a journey and so is financial goal setting. The planning and goal setting never ends, it just changes depending on the season of life we are in.