5 Steps for Financial Goal SettingHome » Personal Goals » Financial Goal Setting
By Jonathan Eqar Managing personal finances has been the bane of many families. Little wonder then that money management problems are the leading cause of separation and divorce among married couples. It seems shocking when we see someone that we considered fairly well-to-do money wise descend into bankruptcy and poverty. So how do you deal with financial problems? The biggest problem people have is often managing their money, not how to make it. Sometimes superstars or top athletes make millions but lose it all because of their heavy spending habits. So the strategies I share here are more on managing money rather than making more of it. I believe strongly in the saying “A dollar saved is a dollar earned”. In the real world, a dollar saved is MORE than a dollar earned, since you have to pay taxes for every dollar you earn! This is why financial goal setting is crucial! They will act as a control mechanism allowing you to balance between your goals and enjoyment today with your future financial security. The actual process of financial goal setting is quite simple. All it needs is you to adhere to it. Here are 5 key steps in financial goal setting: Financial Goal Setting: The 5 Steps1. Set and write down your financial goals2. Breakdown the goals into bite-size chunks 3. Create a detailed plan of action 4. Grow your financial knowledge 5. Evaluate progress Set and write down your financial goalsIdentifying and listing your financial objectives must be the FIRST thing to do. Do not fall into the trap of keeping it all in the head. That is the easiest way not to achieve anything. Documented goals are easier to track and allow for easier assessment in terms of how realistic they actually are. Breakdown the goals into bite-sized chunksSometimes your overall goals can seem enormous when looked at as a whole. You may be shocked to learn that your dream of accumulating $1,000,000 is almost impossible to reach. This can be counterproductive as it can reduce your drive for achieving it.To address this, set milestones for each goal. Milestones help you see when you are behind schedule or on track. Create A Detailed Plan of ActionA good criteria for setting an effective goal is to make it a SMART goal – Specific, Measurable, Achievable, Realistic and Time-Bound.There is no point setting vague goals like “get out of debt” or “save a million dollars”. Create a plan of action with realistic time estimates. Do this by calculating how much you need to save or repay a debt with the help of these calculators: Net worth Calculator Savings Calculator Mortgage Repayment Calculator Use this calculator to find out how long it takes to repay your loans. Alternative calculators: Mortgage Repayment Calculator (£) or Mortgage Repayment Calculator (AUD) Budget Calculator Credit Card Charges Calculator Credit Card Payoff Calculator Loan Repayment Calculator With the help of these calculators you should be able to set more specific goals like "Get out of debt within 5 years, by putting aside $800 of current income away every month to clear away my debts" Grow Your Financial KnowledgeEngage the services of a personal financial advisor or consult friends and relatives who you consider to be conversant with emerging personal investment options.Take time to read books, magazines and journals that will open you to new areas that can aid in achieving your financial goals. Evaluate progressYou might have heard of the popular management cliché “If you cannot measure it, you cannot manage it”. You must continuously measure progress against your goals in order quickly deal with any shortcomings. Such reviews can take place monthly, quarterly or any other interval that you consider best in your circumstance. However, don’t have assessment periods too far apart. Considerable damage can take place over larger review intervals. Following these five steps should set you in the right direction in having a stable and more financially secure future. My Final Tip: Consult Close Family MembersWhen setting up financial goals for your household, consulting with your partner is crucial! Very little can be achieved if the two of you are pulling in different directions. There is another important constituency that you must incorporate in your decision making process: your children. This will depend on the age of your children. Children who are in their teens already are in a position to choose what they want to do in life in terms of academics (or career) and sports. But you may have setup a long term saving plan for their college education, so constantly engage them to make sure your projected savings are, where possible, in line with their goals. There is no point earning more when you just spend everything you earn. Keep track of your finances, and save whenever possible.
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