This is the second post in the Money Girl’s Beginners Guide to Becoming Rich. To read all posts in order, start with Change your Money Mindset then continue reading the rest of the series on this page.
If you had to choose between sitting down to set goals or sitting on the beach in Palawan, you would probably choose the beach. But how would you pay for the airfare? Hotel? Food? Souvenirs?
Goal setting may not be exciting and fun, but it helps you to save for and achieve exciting and fun things, as well as more important things (like money for retirement or your children’s education). Even if you are putting money in savings, how do you know if it is enough to get what you want and when you want it by?
By taking the time to think about what your goals are, how much they cost, when you want them by, and what your regular expenses are, you will know exactly how much to save each month and whether you need to make changes to your budget so that you can both reach your goals and pay your bills with ease.
So I’m here to help you with not only setting financial goals but helping you reach it. Read on for the steps that can help make your vision a reality.
To help you set your goals, Download the Financial Goals Worksheet.
1. Write Down Your Financial Goals
What are your financial goals? What does it mean for you to be financially successful? What does it mean to be rich? Buying a house? Earning a 6-figure monthly salary? Having 100,000 pesos in your bank account? Driving a brand new, high-end car? Becoming a millionaire? Starting a business? Travel around the world? Be debt free? All of the above?
The more specific you can be about your goals for your life, the easier it will be to develop a plan to reach them.
OK, now write your goals down. Why? Because research shows that people who write down their goals are more likely to achieve them.
2. Figure Out What Your Real Motivation Is.
Why do you want to be financially successful?
When you spell out why you are doing what you do, making those results a reality becomes much easier.
The easiest way to discover purpose is to use two simple words: “So that…”. For example, for me this might look something like: “I want to travel the world so that I could spend time with the people I love.” or “I want to buy a two-bedroom house so that I can provide a safe and comfortable environment for my family to live in.”
This will help you clarify your priorities, give you direction and enthusiasm to work on the things most important to you. It will also give you a reason to say “no” to distractions and allow you to establish a basis against which you can review your progress.
Get the idea? Good, write it down too.
3. Try to set SMART goals.
Make your goal be specific, measurable, attainable, realistic, time based, and flexible. Make sure you prioritize your goals. Which ones are the most important to you? As you put together your financial plan, place each goal into one of three categories:
Short-term goals: These are goals that you believe you can accomplish within the next six months to one year, such as putting a certain amount of money in your savings, paying off debts, or planning your child’s birthday party.
Medium-term goals: These are goals that you feel you can achieve within the next five years, such as having enough money for a down payment on a home, paying off a car loan, or putting a certain amount of money in your retirement account.
Long-term goals: These are goals that you believe will take you longer than five years to achieve. They may include sending your children to college, having enough money to retire, or taking your dream vacation. Most long-term goals require regular savings.
Be realistic about your goals and how long it will take you to achieve each one. If you set your goals too high, frustration and disappointment will keep you from reaching them.
Most likely you will start with short-term goals first because they are probably the most urgent, but you may be able to work on some of your medium- and long-term goals at the same time. For example, while you are paying your credit card debt over the next six months, you may also want to start putting aside money for a down payment on a house with the goal of having the money you need in two years.
Oh, be sure to write this part of your goal down too!
4. Post Your Goals
Post your goals in visible places to remind yourself every day of what it is you intend to do. Put them on your walls, desk, laptop, or refrigerator as a constant reminder. OR, you can create a vision board. Putting your goals into pictures on a board will help you visualize what you desire and help you get there faster.
5. Make an Action Plan
Action Plans are simple lists of all of the tasks that you need to finish to meet an objective. They are useful, because they give you a framework for thinking about how you’ll reach a goal efficiently. This is especially important if your goal is big and demanding, or long-term. Read on to our next post on how to actively reach your goals.