Assessing and Revisiting Your Financial Goals
There comes a point in every life where something needs to change. In Western culture, this more-often-than-not involves making financial changes. If you’re at a point where you’d like your financial life to look differently than it does, or even if you’re just wondering what it could look like, here are some tips on getting through the process.
Where are You Now?
For some people, this is an easy question. But if you don’t have meticulous records and can’t account for every penny you’ve spent over the last several years, you can still figure out where you’re at.
First, look at all your account balances. Include any investment or retirement accounts. Then track your spending for a week. This will give you a good snapshot of how you typically spend.
Look at these items, along with any other relevant financial information you might have. For instance, if you know you’re getting a raise soon or you’re sure there will be money coming in from a trust fund or an investment, consider that, too.
Take your time with this process, until you feel like you have a good feel for where you are financially. You should know what you have, how you spend, and have a rough idea for what your financial future looks like before you move on to the next part of the process.
Where Do You Want to Go?
Make a list of everything you’d like to do that involves money. This is where you get to dream. Are there things you’ve always wanted to do but haven’t had the money? Are there things you would do if money weren’t a option? Add them to the list.
Consider practical things, too. Maybe you’d like to pay for your kids to go to college, help your mother pay for her nursing home, or start a new business. These things all go on the list, too.
When your list is done, take some time to look it over. While you probably cannot make every item on it an immediate goal, as you muse your way through it you’ll find that some of the things on the list are more important to you than others. If something stands out, mark it in some way.
Depending on how much discretionary income you have, you’ll want to whittle this list down until it contains only a few items that are very important to you. These are the things you’ll have the most motivation to go after.
Turn Your Dreams Into Goals
There are many methodologies for setting smart financial goals. Here is how we recommend you do it: now that you have a short list of items that mean a lot to you, translate these into goals. “Take the family to Fiji” isn’t a goal, because it’s too generic. Instead, break it down into smaller, concrete steps.
You could start with, “Save $100 towards Fiji trip every month for 6 months.” After that, you might try to save $200 or even $300 every month. You should also put, “Research Fiji trip,” on your list of goals, so you’ll know how much you’ll need to save.
Dreams often don’t come true because they feel too big and too far away. “Take the family to Fiji,” can feel like it’s impossible and impossibly far away, especially if you’re struggling just to make ends meet. But researching it, a much smaller task, feels completely do-able, as does saving $100, $50, or even just $10 this month towards the trip.
Once you’ve broken your dreams down into goals, set a realistic timeline for them. In the example above, it’s probably best to research the trip before you set a savings goal, so you know how much you’ll need to have. Similarly, make sure you give yourself plenty of time to save the money, so it doesn’t become something stressful.
Get to Work
When you have your dreams outlined into step-by-step goals, there shouldn’t be anything holding you back from starting towards them. Follow your plan as best you can, knowing that things always come up. If you have to take one of your kids to the ER for stitches, you may not be able to save that month. That’s ok – just pick up where you left off the next month. If you’re having a hard time achieving your goals, you may want to revisit them and adjust them, or perhaps think about setting up an emergency fund with supplemental income. The important part it to stick with your goals and make it a habit.
Though it may be slow, seeing real progress towards your goals and, therefore, towards your dreams, will help keep you motivated even when its hard going. It will also encourage you because, finally, your life is going in the direction you want it to go.
Image courtesy of Sabrina Eras.
Saturday, April 16th, 2011 at 6:11 am