Dealing with money responsibly when you don't have deep pockets takes planning, restraint, and patience. It also takes a certain amount of self-knowledge and a desire to succeed. One of the big questions to resolve is whether you have financial dreams or financial goals. While they may sound like the same thing, they're not. A financial dream is something you hope for; a financial goal is something you've planned for. And it's the planning–-not the hoping--that makes things happen.
What Does a Financial Goal Look Like?
A financial goal details:
- What you plan to accomplish
- The resources you'll need to make it happen
- How much time you'll need to make it happen
- How you plan to work your goal into your budget
Here's How to Get It on Paper
- List your financial goals: Create a financial goals worksheet and use it to list your goals based on how long you think it will take to achieve them. Place goals that can be accomplished in less than six months under "Short-Term Goals," goals that can be accomplished in six months to a year under "Medium-Term Goals," and goals that will take more than a year to accomplish under "Long-Term Goals."
- Estimate the cost: How much money will it take to reach each goal? Do some research if you aren't sure. Then write the amount under an "Estimated Cost" column.
- Set a target date: When do you hope or need to meet your goals? Set a target date for each goal on your list and use this as your deadline to meet or beat.
- Determine how much you need to save: Divide the estimated cost of your first goal by the number of weeks until your target date. This will show you how much money you need to save each week to meet your goal. Enter the resulting figure in an "Amount to Save Weekly" column and repeat for all of the other goals that you've listed.
- Budget for your goals: Rework your budget to include the money that you need to meet your goals. Be ruthless with your cuts if you have to be. Then put your plan into action and watch those financial goals turn into financial reality.
Tips for Setting Financial Goals
- Be realistic about how much time and money it will take to accomplish each goal--an estimate that is too low will only frustrate you.
- Keep your motivation by revisiting your goal list frequently to check on your progress.
- Setbacks will happen. If something throws you off of your target date, don't give up--set a new date or find a way to catch up.
- Have more goals than you can work on at once? Determine which ones are most important to you and make those your first priority.