With the New Year behind us, and with Lent having already become stale, it’s easy to fall into the trap of believing you never stick to your goals.
This can particularly be true of financial goals and resolutions: you were doing so well until the washing machine broke; you’re finding it hard to stick to your weekly grocery spending limit; or your child was desperate not to miss out on that great, but expensive, school residential. Setting financial goals is the key to success, but how do you set financial goals that stand the test of time? In short, how can you ensure your financial goals are achievable?
What most people don’t realise is that they set themselves up to fail by setting financial goals that simply aren’t going to be achievable in the long term. For example, your goal is to save more than you need to live on, or you make your spending allowances too restrictive. Therefore, before even considering what your financial goals should be, you should ensure that you are taking a reasonable approach. This means understanding your expectations in the context of what is actually realistic.
The first place to start, therefore, is to know exactly what your financial state of play looks like. You need to know exactly what you have coming in, as well as financial commitments thus far. You may be able to do this sitting down with an Excel spreadsheet, your bank statements, and your payslips. However, it’s easy to miss things, so make the most of a suitable online Budget Planner Tool.
Once you have a clear understanding of your finances, now it’s time to look at priorities. You may want to save for a life event such as buying a house, or having a baby. Perhaps you want to focus on long-term financial health and retirement. Or maybe you prioritise holidays. Whatever your main priorities are, your primary one should always be to pay off debt first. All the while debt is hanging over you; you are losing out to interest. Therefore, whilst saving a little for the short term or emergency goals might be possible whilst you have debt, realistically you should make the debt the priority.
Set SMART Goals
Now you’re in the position to set goals that will be truly achievable. Taking the business acronym ‘SMART’ your financial goals should be: Specific; Measurable; Attainable; Relevant; and Timely. This means setting various goals. Some of these will be short-term goals, for example a holiday or an emergency fund. Some will be mid-term such as saving for a life event such as a house or when planning a family. Some will be long-term such as pensions, retirement, and trust funds for children.
Using knowledge gained from your budget planning, you can see what money you actually have to play with and therefore assign realistic amounts to each goal. This may mean you need to adjust the goal to be more realistic. If you are married, it is essential that you share the same financial goals.
Track Progress and Measure
In order to keep financial goals achievable it is important to assess them regularly. Are you on track? Could you save more? Is debt growing whilst you’re trying to save? Do you need to realign priorities? Either keep track using a personal spreadsheet, or making use of various smartphone apps, or even goal setters linked to specific accounts.
Achievable Financial Goals
Be reasonable with yourself and with your expectations. Progress is always progress, no matter how small. By ensuring your financial goals are achievable you can be certain that you will be improving your financial health over time, and be well on the way to financial success.