The Importance of Setting Financial Goals

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Learn why you need financial goals and the step by step process to help you set and reach them through smart budgeting
Take a look at your finances.  Do you know where you want to go?  What are your financial goals?  Do you know how to get where you want to be?

It can be frustrating and confusing to answer these questions.  However, financial goals are extremely important in your overall financial health.  In order to know where you want to go, you need to know how you will get there.

WHAT ARE YOUR GOALS

You need to determine your short-term and long-term goals.  Goals often include things such as being debt free, dream vacation, new car or increased wealth. Your goals are just that – yours.  They do not belong to anyone else.  No one else can claim them.  While they may end being similar, they are never completely the same.

SETTING GOALS WITH A PARTNER OR SPOUSE

Sit down with an open mind.  Each of you should present 1 – 2 financial goals you have that you think would be attainable.  Make sure you explain why you want to reach it.  It might have been something you have wanted since you were a teenager or it could be that you can’t stand to cook on that cracked countertop any longer.

As your partner shares his or her ideas, listen.  Don’t talk.  Allow the entire idea to be presented.  Make a note of what it would cost to reach that goal.

Once your partner is done, then it is your turn.  You too will be given the same courtesy to outline your goal and explain why it is important to you.

Once the discussion is over, look at them together to find a way to agree.  You may realize that some of your goals actually align.  For instance, you might want a place to workout and your partner wants to finish off the basement.  Those might work well together.

Getting on the same page about finances is half the battle. Keep those same lines of communication open as you find new ways to approach your goal.

WHAT DOES YOUR GOAL COST

Once you know your goals, you must know the cost associate with them.  It might be a fixed cost, such as a vacation.  It could even be a variable cost, such as increasing retirement savings.

List each goal and give it a value.  This allows you the understanding of the cost associate with your goals.

PRIORITIZE YOUR GOALS

You may have five goals on your list.  Some of them are wants and others are needs.  For instance, your son may need braces.  However, you might want to save for that expensive driver to up your golf game.

The savings priority should first cover the needs on your list and then, you can begin the focus on your wants.

Just make sure that you revisit your goals every month or two, as your needs will change.  What was a priority last month may not be such this month.  Goals are always changing and you need to be flexible and change with them.

 

HOW TO REACH YOUR GOAL

Now that you have the goal in mind, next up is to figure out how you will fund that.  Together, brainstorm what you can do, together and individually, to get closer to that goal. Is it time for a garage sale? Can you live without cable?

Consider creating a special joint account to give your money a place to grow. Several credit unions and banks allow you to name your accounts so you could label one ‘vacation’ or ‘dream home’ for extra inspiration. Each of you should put money from your monthly paychecks to put into this account.

How much is up to you, but it should be related to how much you bring home. I’d recommend setting up automatic deposits this way the money is automatically transferred eliminating any desire you might have to spend it now.

Lastly, it’s important to revisit your goal(s) every few months. Life can change pretty quickly and you may need to make adjustments. However, if you and your partner are rolling with the changes together, nothing can slow you down.

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