Creating Financial Goals That Fit Your Life

 

Setting Financial Goals That Work for You

    We have (or should have) already created a simple budget, now it's time to set our financial goals. These goals are going to be personal to you and your current situation. Some simple examples of a financial goal could be to save for a downpayment for a house or car, to pay off student loans, or to save for a vacation. While these are simple examples of some financial goals, I want you to think a bit harder for the goals.

What Are SMART Financial Goals?

    I want your financial goals to be S.M.A.R.T goals- meaning they are Specific, Measurable, Achievable, Relevant, and Time-bound. Let's use the example from above, save for a downpayment for a house or car, and lets make it into a SMART Goal:

        "In three years I am going to save $70,000, for a 20% downpayment for a house valued at                             $350,000." 

    We can break this goal down further to see that you’d need to save roughly $1,945 per month. Some people might say that’s unrealistic, or wonder how they’ll ever afford a house at that savings rate—but the thing is, if you completed a budget, you could figure out what your monthly savings rate could be and adjust from there.

Why SMART Goals Work

    When you follow the SMART goal method, your goals become more focused and achievable:

• Specific: You know exactly what you're saving for.

• Measurable: You can track your progress as you go.

• Achievable: Your budget helps determine if the goal is realistic.

• Relevant: The goal matters to you.

• Time-Bound: You have a deadline, which creates urgency and direction. 

Breaking Goals Into Short, Medium, and Long-Term

    Once you have an understanding how to create S.M.A.R.T. goals you can then break these goals into short, medium, and long-term goals. 

• Short-term goals: Within 1 year
  Example: Build a starter emergency fund in 6 months

• Medium-term goals: 1–5 years
  Example: Save for a downpayment on a house

• Long-term goals: 5+ years
  Example: Reach a specific amount in a retirement account

    Categorizing your goals helps you prioritize them. For example you should prioritize paying off high interest debt before focusing on investing, or building an emergency fund would take priority over paying off high interest debt.

Use the Goal Tracker in the Workbook

    If you need help keeping track of your financial goals, the goal savings tracker in the budgeting workbook I created can be a helpful tool.
It can be found [here].

Final Thoughts: Your Goals Will Grow With You

   Just like your budget, your goals will change as you go through life. They're not set in stone and can be adjusted as your life evolves.

  If you want to share your financial goals, feel free to leave a comment. (Please limit this to financial goals). Shared goals can be as broad or specific as you'd like to share, for my wife and I we are currently saving for our yearly vacations. We have a set amount that we put into a sinking fund and we use this for our vacations.