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If you're wondering how to make financial goals that will really work, I suggest thinking in terms of these three categories:
Goals the benefit yourself. Goals that benefit your family or loved ones. Goals that benefit your community or the world around you.
Setting goals for your finances and monitoring them is crucial to establishing confidence in your financial future. Once you know you are on track to meet your financial goals, then you will never feel guilty or irresponsible about spending or giving away money that is not a part of your regular monthly budget.
To help you set goals that will really make an impact, remember the mneumonic tool SMART.
Specific
Measurabe
Attainable
Realistic
Timely
Specific - Do your goals spell out exactly what you hope to achieve? If you start with an ambiguous goal, like I want to save enough money to pay for my child's college education. Clarify that goal and make it more specific by asking yourself additional questions. What kind of college would I be willing to pay for? Are we talking about community college or Harvard? Do some research on how much your goal will likely cost and consult with an expert or two if needed.
Measurable - Use a goal that can be measured so that you can track your process and celebrate your success. If your financial goal is to save for retirement, take it one step further and say, "I will save 15% of my income this year towards retirement." Then, you will know exactly what to do to meet your goal and you will easily be able to determine if you are on track.
Attainable - Have different levels of goals. Set a base (minimum) goal and a stretch goal. Even your stretch goal should be attainable within your current cash flow (assuming you do not experience a major unexpected change in circumstances).
Realistic - Avoid unnecessary frustration by setting goals that are reasonable. If you think your goals might be unrealistic, run them by a friend, spouse, or financial planner for a second opinion.
Timely - I once had an executive coach who wisely said, "If it's important, it must be scheduled." Make sure you give yourself a deadline for your financial goals. Every worth while project deserves a deadline. Of course, your time frame may change over time. For example, if you are saving up for a down payment on a new home and you recieve a large bonus, you may be able to fund that down payment goal ahead of schedule. On the flip side, if you were laid off for 6 months, you might need to push that time frame out further. The important thing is to maintain a timeframe for each goal, even when circumstances change.
The last thing I would recommend is to ask for help. Having an accountability partner is critical to your financial success. Ideally, this would be a financial planner, but if you are not ready to hire a professional, perhaps you have a friend who also wants to get his or her finances in order. You could help each other stay on track with monthly a check-in. In any case, the more people who know what you intend to accomplish, the greater your chance of success. First of all, because they can remind you of your goals and help you brainstorm ways to accomplish them if needed. Secondly, because once you state your intentions (hopefully to several people) you will feel the pull to keep your word and maintain your credibility. Never underestimate the value of accountibility as you work towards financial independence and success.
I fulfill this role for my clients. Rather than me telling them what they should do with their money, I ask them questions to draw out their values and priorities. We then set goals together and I take on the role of monitoring their progress (both in the market performance in their investments and in their giving, saving, and spending).
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