Financial Goalsetting | Shelter Insurance®

Financial Goalsetting

A new year is a great time to start fresh with your finances, but it’s a good thing to do anytime you have a change in your life or you feel you need more to be more financially focused. You might be saving for something like a vacation, then move up to something like a car, a house or even longer term, like retirement. All of these things are easier if you plan, keep a budget, curb your spending and set smaller “milestone” goals to reach along the way.

Your financial goals can vary drastically depending on what stage of life you’re in. When you’re young, your goals may be related to paying down debts or student loans, saving for a vacation, saving for retirement and maybe even saving to buy a house. When you get married, you may need to reevaluate your goals. Maybe you were both saving to buy a house, and now you can combine those savings and be on the fast track towards that goal. But what if one of you is a spender who has some credit card debt and one of you is a saver? It would be smart to talk about your financial goals and how you will handle your finances. When you start a family, your goals may change a bit again. In addition to buying a house, you’ll probably start thinking about saving for your child’s education.

To do all this, you need a plan. It doesn’t have to be fancy—just write out which goals are long-term, mid-term or short-term, then create a budget.

If you search the internet for “ways to create a budget” you will find a lot of results because there are a lot of different ways to handle it. Review them and choose a method you know you will stick to. Factor in your income and fixed expenses, and  consider paying down as much of your debt as possible and creating an emergency fund while still saving for your goals. And don’t forget to leave room for extras such as birthday gifts, wedding gifts, etc. and of course, entertainment. After all, having a budget doesn’t mean you can’t have fun!

Curb Your Spending
This is much easier said than done, especially if you are a spender. Here are some tips—one might just do the trick for you:

  • Put away your credit cards and start paying for things with cash.
  • Write down everything you spend—even a bottle of water on the way to the gym. Do this for a month before you create your budget to see where you are overspending and what spending is necessary—or not.
  • Think big picture. Ask yourself if the item you are about to purchase will really be worth it in comparison to your goals. If not, don’t buy it.

Small Goals as Part of the Bigger Picture
Big goals can seem overwhelming. If you could save your entire salary, you might be able to meet your goals quickly, but most of us have to pay rent or a mortgage, utilities, make a car payment, pay for insurance, buy groceries and spend money on other necessities life throws our way. If you break your big goals down into smaller pieces, it seems more achievable.

Just like budgets, there are various ways to set goals. The most well-known goal setting style is S.M.A.R.T. goals, and they seem to fit really well when it comes to financial goals. S.M.A.R.T. goals are:

  • Specific –When it comes to financial goals, you know how much money you need to save to achieve a certain goal. For example, instead of saying you want to save to buy a house, you might say you want to save a 20% down payment for a house.
  • Measurable – Money is very measureable. Specifying you want to save 20% is good, but making that a dollar amount is even better.
  • Attainable – Control your expectations. Sometimes big goals require small steps to achieve. If 20% is too much, make it 10%.
  • Realistic – A sure-fire way to ruin your chances of achieving a goal is making it so big it’s impossible. For example, if your goal is to save the entire amount for a house in five years, that is not realistic. (Mortgages are financed for 15 and 30 years for a reason—it’s a realistic time frame for most of us to pay for a house.)
  • Timely – You need to set a date for completion of your goal, otherwise you might not ever achieve it. Your goal could be to save a 20% down payment for a house in five years instead of just saving a 20% down payment for a house.

Stay Motivated
Being on a budget is like being on a diet. It can feel like you’re being punished—things you enjoy are suddenly off-limits. When you view each goal as a whole, it can seem overwhelming, and you might want to quit. Instead, try envisioning the end result. See yourself enjoying your new house, driving your new car or laying on the beach on  vacation. “Eyes on the prize” is a real thing—and a great motivator. And remember when we talked about breaking your big goals down into smaller increments? You can—and should—reward yourself a little bit when you reach those smaller milestones. If you’re on a diet, this might mean buying a new outfit to celebrate a weight loss—even if it’s only a portion of the overall number you are trying to achieve. If you’re on a budget, you might celebrate with a cupcake—that is, if you’re not on a diet!

A final piece of advice—resolutions are made to be broken, so don’t make getting your finances in order a resolution. Make it a GOAL and get results.

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