Here’s how to get started on firming up ambitious but wishy-washy financial goals.
If you’re like most people, you’ve probably got at least a few financial goals in mind that can improve your life both now and years down the road. Maybe you want to pay off a debt that’s been haunting you for years, or you’re ready to start saving for retirement. Your first goal may even be as simple as having a savings account for emergencies.
Whatever your financial goals, if all you do is bounce around vague ideas about how to one day achieve them, you won’t make much headway. But what if you got serious about taking steps toward achieving the financial goals that can make your life better? Here are the four steps to help you achieve your goals.
How to make realistic financial goals
Set S.M.A.R.T. goals for your money
A SMART goal is specific, measurable, attainable, realistic, and time-related. The more information and limitations you set for a goal will help you track your progress to attaining your goals.
Make a plan
Once you know what your SMART goal is you need to make plans to make it a reality. maybe break your goal down into short-term small accomplishments that will be easier to reach. If your goals are too lofty you will lose focus and drive to complete them.
Adjust your numbers to stay on budget
Make sure you have a balanced budget and are not overly focused on one goal and ignoring the bigger picture. Paying down debt is wonderful but it is also important to save for an emergency so you will not have another emergency cost sending you further into debt.
Review your budget regularly
This is not a one-and-done event. You need to make sure you continue to stay on track. Check your budget every pay period to confirm your money is going where you planned it to go. Maybe you had an unexpected expense or windfall of cash that you need to account for.
Realistic financial goal examples
I should set aside money for emergencies
Tired of putting car repairs, doctor’s bills and new appliances on credit cards? If so, you already know you need an emergency fund. You’ve just never gotten around to opening a savings account designated for emergencies. Or, you opened an emergency savings account, only to drain it and never replenish the funds.
If you want to have savings to cover emergencies, scrounge up at least a few hundred to a thousand dollars and open an emergency savings account. Then allocate a percentage of each paycheck to deposit into the account. When you must withdraw money for an emergency, commit to replacing that amount as soon as possible.
Maybe I should save for retirement
Retirement may seem a long way off, or maybe it’s approaching soon. Either way, take steps to get started on saving for retirement. For example, if your employer sponsors a 401(k) plan, sign up to contribute a percentage from each paycheck, especially if the company matches a portion of each contribution.
Study up on various types of retirement accounts and investments. To figure out the best path forward, consult a financial planner or retirement planning professional.
Someday I’ll pay off all this debt
Racking up debt on credit cards is easy and fun, but paying it off can be brutal when you owe too much. It can even take years to pay it off if you make only the minimum payment or pay a small amount each month. But don’t despair. If you want to pay off debt faster, you have options. You just need to get started.
Consider meeting with a credit counselor at a nonprofit credit counseling agency, which is usually free or available for a nominal fee. A credit counselor can assess your situation and help with creating a budget and debt management plan so you can pay off debt. If your debt amount seems insurmountable, signing up for a debt settlement program may be an option.
However, vet the business first by checking for complaints against the debt settlement company with your state attorney general’s office and the Better Business Bureau. If you’re unsure of who your state’s Attorney General is, get started by searching USA.Gov for contact information.
I should be more careful with spending
We all overspend sometimes, but if you’re broke at the end of every pay period, you know that something is wrong, and you need to fix the problem. But maybe you hesitate on getting to the root of the problem because you don’t know where to start.
That’s where creating a budget can help. When you know how much money is coming in, how much goes to monthly expenses and how much slips away unnoticed – until you run out of money again – you can gain control of your spending.
I wish I could buy a house
Buying a home is one of the biggest purchases and milestones of your life. No wonder saving for a large down payment seems so intimidating. But you have to begin somewhere. Set a goal of how much a down payment you will need and allocate money each month to a designated savings account.
Meanwhile, educate yourself on home buying and homeownership by taking a home buyer’s course offered by a nonprofit credit counseling agency or city program.
Short-term financial goals
Setting big financial goals like buying a home, saving for retirement or investing wisely can be intimidating when you’re trying to get your finances in order, pay off debt or improve your credit. Fortunately, you don’t have to start off with setting milestone financial goals right out of the gate.
That’s because focusing on short-term financial goals will hone your personal finance, money management and saving skills so you can gain confidence and achieve major financial goals sooner. And the good news is that many short-term financial goals can be attained within 90 days to six months – or, in some cases, even as little as 30 days.
1. Start an emergency fund
Experts recommend having enough emergency savings to cover all expenses for at least six months if you lose your income. But setting a goal to save anywhere from $20,000 to $80,000 or more in emergency savings can seem nearly impossible, so many people don’t even try.
However, an emergency savings fund can keep you from racking up charges on a credit card for auto and home repairs and other unexpected expenses. Less credit card debt means you can put that money towards bigger goals such as a down payment on a house or starting a family.
So, set a short-term goal of opening a savings account and saving at least $1,000 initially. Then raise the goal amount incrementally each time you meet our emergency savings target. Before you know it, you’ll have a respectable emergency fund that you can continue to grow.
2. Create a budget
The key to managing money better is knowing what you have to work with, so set a monthly budget. You can even download a free budgeting app such as Mint or a similar app to make getting started easy. Need assistance with creating a monthly budget? Meet with a credit counselor at a free or nominal-fee nonprofit credit counseling agency for guidance and tips.
3. Reduce monthly expenses
It’s easy to fritter away hundreds of dollars a month on mindless spending and unnecessary expenses. However, it’s also easy to reduce monthly expenses, especially once you’ve got them all accounted for in a monthly budget.
For starters, you could shop around for better insurance rates, cancel streaming subscriptions and trim the amount spent each month dining out by cooking more meals at home. To get an idea of everyday spending, write down every dollar you spend as you go about your day. Then get ruthless with unnecessary spending so you can pay off debt and/or add to emergency savings.
4. Add to your income
One way to achieve both short-term and long-term financial goals faster is to increase your income. That may mean getting a new, higher-paying job, taking a second, part-time job or earning extra cash by pet sitting for your neighbors, mowing lawns, or another side hustle.
Then put the extra cash towards emergency, retirement, or another savings account or paying off debt so you can achieve bigger goals later, such as buying a house, moving, starting a family or another milestone financial objective.
5. Go on a spending fast
Many people go on “detox” fasts intended to cleanse the body of toxins by cutting out sugar, alcohol or other foods or substances. But did you know that you can also work on detoxing your spending habits by going on a “spending fast” for at least 30 days?
Write down ways you can spend much less for a month, such as not using credit cards, preparing meals at home instead of getting takeout or buying snacks at the grocery store instead of the convenience store or coffee shop. Then keep track of how much you save. Who knows? You may decide to make some of your new spending fast habits part of your everyday life.
6. Pay off one debt
If you have several credit card or loan balances, choose one to pay extra on so you can pay it off fast. For example, if one personal loan balance is $500, you may be able to knock that out in one or two months so you can focus on other debts. This way, you’ll gain confidence and momentum to pay off other debts.
7. Pay off one of your credit card debt
Getting to a zero balance with all credit card debt can still be a semi-short-term goal, even if that target seems like it could take forever. If you could be debt-free in a year or 18 months, that’s still a fairly short-term goal. And once you focus on paying any extra money towards credit cards and paying off balances one by one, you’ll be amazed at how quickly you can get rid of credit card debt.
No matter what kind of debt you have, Debt.com can help you solve it.
Published by Debt.com, LLC