A Step by Step Guide to Achieve Your Financial Goals
Money is one of the biggest stressors for people. Many people often do not think they have enough of it. Others are not sure how they are going to pay their bills. Others still worry about their retirement and if they are going to have to work for the rest of their lives. Budgets often scare people because they feel like they no longer have control over their own money. Even though budgets are the best way for you to gain control over your money, instead of it controlling you.
One of the best ways to get control of your finances is to set realistic financial goals. I am sure many of you just do not know where to start with your finances. Continue reading the rest of this article to find ways to achieve your financial goals.
What are Financial Goals?
Before you can hope to achieve your financial goals, you need to understand what financial goals are. Financial goals are the priorities that you set for yourself to help you achieve some results with your finances. They usually revolve around saving and spending money. Every person has different goals because everyone has different priorities. Your goals can change with time because your priorities may change based upon what is happening in your life.
When you do not set financial goals, you end up spending money in places and amounts that you do not even realize. Financial goals are important because they help you achieve a specific result. They also help you create a step by step process to get the results you want. They help you resist making impulsive purchases while keeping track of the amount of money you are spending and where.
How Do I Create Financial Goals?
When you want to achieve your financial goals, it is helpful to understand the best way to create your goals. One of the best ways to determine which goals are the best for you, you can start by asking yourself some questions. When you answer the following questions, it can help you figure out which financial goals are the best ones for you:
When you think about your future, what is most important to you? Would you rather have a new house, a new car, or be able to retire early?
When you do retire, no matter what age that is, where do you want to live? Do you want to stay in the state where you are currently living?
Do you want to be debt-free when you retire? Do you want to be debt-free now?
What are your immediate needs today? Do you have bills that have not been paid? Do you need new items for your home, such as appliances? Do you need a new car, or perhaps a new car?
Where do you want your finances in five years? Do you want to have a certain amount of money in your savings account? Do you want to be able to retire at a certain age?
Are there other items that you must have right now in your life?
Once you have answered these questions, you must create a plan that you can stick to. If you want to be able to stick to your plan, you should make it as flexible as you can. Once you know where you want to go, you figure out the steps it is going to take to get you from where you are right now to where you want to be.
Step 1: Choose Your Goal Length
After you have determined what you want your goal(s) to be, you must determine how long you want it to take to achieve your financial goals. Your goal may dictate the length, for example, if you are getting married and you want to have a certain amount of money saved, you are bound by the date of your wedding. You may have other goals that give you a little more flexibility in how much time you have to achieve them.
Short Term Goals
There are short term goals that you want to happen in a short amount of time. These items might include purchasing furniture, home improvements, or planning and saving for a vacation. You may also have a short term goal of paying off a credit card, eliminating other debt, creating a budget, or reducing your spending.
Mid Term Goals
There are mid term goals which means they will typically take anywhere from 3 to 10 years to complete. Some goals that fall into this category may be saving money to buy a house, paying off a loan, saving for your wedding, or taking a long dream vacation. Another mid term goal is to come up with a way to have more than one stream of income coming in. That does not mean working even more hours at your current job. It could mean finding a way to make money doing something you love or starting a side business.
Long Term Goals
Lastly, there are long term financial goals which are goals that are going to last over the long haul. The most common long term goal is saving for retirement. You are never too young to begin saving for retirement. Any money that you can put away for retirement will benefit you greatly in the long run. Another long term goal may be to pay off your house and be completely debt-free. Another one might be to have a certain amount of money in an emergency fund at all times. That means if you have to spend it, then you have to replace it.
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Step 2: Write Them Down
Have you ever heard that a thought is not real until you commit it to paper? There is something about the act of writing down your goals that makes them become real and something you want to work towards. When you write it down, you are already taking a step to commit to it. When you write down your goals, it forces you to think about them and be clear with your intention. Even if no one other than you will ever see them, you should take the step to write them down. If you are serious about working to achieve your financial goals, start by writing them down.
Not only should you write down your goals, but you should also write down the steps you plan to take to get there. In addition to that, you should also commit yourself to a timeline. You may not be able to commit to exact dates, such as June 1 of this year, but you may be able to say in one year from now, I will and fill in that blank. Then you can write, in two years from now, I will and fill in that blank. Do not be afraid to put your goals on paper. If you want to achieve these goals, then you owe it to yourself to see them written down in ink.
Step 3: Prioritize Your Goals
If you want to achieve your financial goals, you are going to have to prioritize them. You have to start with goals that are important to you. You answered a list of questions above to help you determine what is most important to you right now. You should keep in mind that what is important to you right now may not be what is important to you in two years. As the circumstances of your life change, so does what is important to you.
You also must determine what is important for you, not what is important for someone else. You need to do what is in your best interest, not anyone else's interests. This is your life to live and you have to remember that these goals should be for you.
Do not beat yourself up if your goals change. It does not matter if they change because something inside you has changed or if some outside influence, such as the need to pay off debt, changes it, your finances and financial goals are meant to have some flexibility to them. The best thing you can do is to bend with them. You should not hold tight to a goal just because you feel some need to reach that goal. Do not be that stubborn. Let that goal go and select another one that makes more sense to you right now. As long as you are working towards some type of financial goal, you are working towards the right thing.
Step 4: Create a Budget
Here is the topic that most people do not like to talk about...budgets. You need to be honest with yourself by realizing if you hope to achieve your financial goals, then you must create some type of budget. A budget is to help you gain control of your finances. If you have decided that your financial goal is to save money to buy a house, how can you expect to save money if you are not paying attention to your spending. You cannot know how much you are spending if you do not have a budget. A budget is simply a way for you to track your incoming money and your outgoing money, or spending.
Be In Charge of Your Finances
A budget helps you gain control. It puts you back in charge of your money and how you are spending it. It allows you to see how much money you have coming in. It also gives you a clear picture of how much money you are spending and where you are spending it. I bet you have absolutely no clue how much you are spending on eating out if you do not have a budget. There is absolutely no way you would know. Take a few moments and create a list of all of your income in one column. Then create a new column with all of the money you spend in a month. Be honest. Then you add up the two columns and you can quickly see the difference between how much money you earn and how much money you spend. Prepare yourself, it might not be pretty.
Step 5: Pay Off Debt
A great way to achieve your financial goals is to pay off your debt as quickly as you can. It is no secret that too much debt holds you back, so you should work hard to eliminate as much of it as quickly as possible. Once you create your budget and reduce spending, you take that money and pay off your debt as quickly as possible.
Understand the Different Types of Budgets
If you are ready to achieve your financial goals and create a budget, you should know a little bit about the major types of budgets.
The Planning Budget
When planning for something specific, like a wedding or a vacation you should use this type of budget. You start with your goal in mind and figure out how much you need. You also need to have an end date for when you need the money. Then you figure out how much money you need to save each month to meet that goal. One of the keys is making sure you know exactly how much money you need. You do not want to get to the end and find out you do not have enough money. You may want to pad your estimate a little. Then you look at the budget you created above and begin to reduce expenses.
The Problem-Solving Budget
This is a simple budget intended to solve a problem. You may not be saving enough money in your emergency fund, so you understand that is the problem. You have to figure out how much money you want to save in the fund each month. Then you cut spending, maybe by eliminating something specific like buying lunch every day. The money you would spend on lunch now goes to your emergency fund. The intention of this type of budget is to address one problem at a time. You fix that problem and once you have enough money in your emergency fund, you focus on another problem.
The Comprehensive Budget
It is the ultimate type of budget. This one requires more work, time, and discipline. This one gives you the biggest results. It means a complete change to your finances. You will sett limits on all your spending by looking at every category and start put limits in every place you can.
Different Financial Goal Examples
When you want to achieve your financial goals, it is important that you determine what you want your goals to be. When you begin to think about financial goals, it is important to understand what types of goals you might want to consider.
Starting a Business
This might be one of those goals. Starting a business is always a smart move, especially if you have a marketable idea. Businesses have changed over time and you no longer need an actual building to start a business. The needs of businesses have changed also, so you may not need as much credit or cash to start a business as you would have in the past. The goal of creating a business may not seem as far fetched as it once was, but you would still need to create a financial goal.
Saving for College
If you have children, saving for their college costs may be a goal for you. The cost of education is continuing to increase every year and many cannot afford just to pay for college without having saved money for it. In today's world, while you can still find great jobs without a college degree, many jobs require degrees just to get entry-level positions. We all want our children to have the best education and hopefully without coming out of college with a large amount of debt. A 529 is a great way to save for your children's college education.
Maybe, the best way to start saving for your children’s college is to open a savings account. We bring suggestions for you down below:
Buying a House
This is another great financial goal that takes some planning. In addition to needing a down payment, your credit needs to be in a good place and you are going to need some extra money to be able to furnish and buy items for your house. It actually takes a good amount of money to buy, move into and fill a house. There are also closing costs, which means you need to come up with additional money to pay at the time you sign your mortgage paperwork. If you are interested in buying a house, you will need to make a plan to do so.
Conclusion
There are many ways to achieve your financial goals. The one that helps you achieve your financial goals is the best one for you. Create goals that are your own and focus on achieving them and you will begin to see amazing results.