For many, finances are a constant worry. You may wonder how to get out of debt, how to afford a home, how to increase your portfolio returns, and so much more. The key to these questions lies in setting realistic financial goals. Here, we will guide you through the process of creating achievable financial goals that we hope will empower you to take control of your financial future.
Assess Your Current Financial Situation
Before setting any goals, it’s crucial to have a clear understanding of your current financial status. Evaluate your income, expenses, debts, savings, and investments. Create a comprehensive snapshot of your financial landscape. This process can be scary and overwhelming, but it will provide the foundation for setting realistic goals.
Define Your Financial Objectives
Now that you know where you stand financially, it’s time to identify your long-term and short-term goals. Long-term goals could include saving for retirement, purchasing a house, or starting a business, while short-term goals might involve paying off credit card debt, establishing an emergency fund, or saving for a vacation. Be specific and prioritize your objectives based on their importance and feasibility.
Make SMART Goals
You may have heard of SMART goals, or goals that are Specific, Measurable, Attainable, Relevant, and Timely.
- Specific: Specific goals should very clearly define what you want to accomplish, as well as who is responsible for achieving the goal. For example, instead of saying “I want to save money,” specify “I want to save $10,000 in the next 12 months.” You may even want to take this a step further by specifying the steps that need to be taken to achieve this goal. For example, “I want to save $10,000 in the next 12 months by putting $750 away each month as well as my $1,000 end-of-year bonus.”
- Measurable: Measurable goals should set targets that can be quantified. This allows you to track your progress and stay motivated. Our previous example of wanting to save $10,000 in 12 months is measurable because we can easily measure our progress toward that goal. For example, you should have about $4,500 saved by the six-month mark. If you have less than this amount saved, we can determine that you are behind on your goal and should try to supplement savings when you can.
- Attainable: Attainable goals should be challenging but within reach. Consider your financial resources, time commitments, and constraints. Saving $10,000 in 12 months is definitely doable for someone who can afford to save $750 per month. However, if this is not the case, then this goal is not attainable and should be adjusted.
- Relevant: Relevant goals should align with your overall financial aspirations and values. They should be meaningful and align with your personal circumstances. For example, you should be thinking about why you may want to save $10,000 in 12 months. Perhaps the extra $10,000 gets you closer to a down payment on a home, or it allows you to take a vacation, or financially prepares you for parenthood. Whatever the reason, be sure your financial goal is relevant in your life.
- Timely: Finally, set a deadline for achieving your goals. This creates a sense of urgency and helps you stay focused and on track. In our example, having a clear timeline of 12 months helps us stay on track and determine if we are successful. Without this portion of our goal, it’s easy for it to be placed on a back burner and be forgotten.
Setting realistic financial goals is the first step towards achieving long-term financial success. By assessing your current situation, defining SMART goals, breaking them down into actionable steps, and tracking your progress, you can achieve any financial goal. If one of your financial goals is to become debt-free but you’re having trouble achieving it, Debtmerica Relief can help. If you need help with debt, give us a call at 800-470-8155 for a free consultation.