Do you feel like you are going in circles when it comes to your personal finance? Or you feel like you’re working so hard but have little or nothing to show? Here is the thing: it might be that you are not planning your finance. There is a need to take Benjamin Franklin’s message to heart “if you fail to plan, you are planning to fail”
To turn the tides around in your finances you need to set financial goals. Simply defined your financial goal can be described as savings, investment, or spending targets you hope to achieve over a set period. Financial goals differ for everyone, here are some examples: building an emergency fund, paying off debt, saving for a house, vacation, retirement or starting up a business.
Defining your goals allows you to create a realistic plan to achieve it, makes it easier to track the progress you are making. If you aren’t working towards anything specific, you’re likely to spend more than you should. Creating a financial goal, forces you to prioritize your needs versus wants, and it keeps you focused and accountable.
In setting your financial goals, you want to ensure you put a pen to paper and write down your goals. Make them specific, measurable, achievable, realistic and time bound. Here is an example of a SMART goal:
I am going to save XXX amount as down payment for my house in XXX number of years
In setting these goals, the aim is to focus on your lane and work at crossing your own finish line…
Breaking your financial goals to into tiny chunks is one great way to reach your target. Once you set a small milestone, the periodic actions required to reach your goal becomes clearer and easier. Assuming your goal is to save $40,000 as a down payment for a 2-bedroom condo in the next three years, one way to break it down would be to determine the monthly cost.
The monthly cost is arrived at by dividing the bulk sum by thirty-six months which comes to $1,111 per month. Afterwards set up a direct debit transfer from your checking to a savings or investment account and decide not to deep your hand into the “cookie jar”.
Today is another opportunity to make your goals happen, keep taking baby steps consistently, and you would be glad you did.
ABOUT THE AUTHOR
pfmAcademy is committed to helping young professionals become intentional about their finance through practical personal financial management tips.
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