Learn how setting goals and creating a financial budget are the keys to getting ahead below.
Imagine what life would be like with no debt, student loans, mortgage, NOTHING…
What would you do? Where would you go? Who would you help?
For most of us, those questions seem like something you read in a fiction story. The thought of being debt free is so far-fetched and unreachable in our minds, we literally give up on life and striving for our dreams.
Well, my friends continue reading this post to see how you too can achieve financial success by learning how setting financial goals.
That is right, setting goals and creating a financial budget are the keys to getting ahead of debt, especially for those of us who were not fortunate enough to be born with silver spoon in our mouths.
How to Set Financial Goals 101
The best way to set financial goals and be successful is to start off with a plan. We all have heard the adage, ‘if you don’t have a plan, then you are screwed’ lol… Or something like that.
My point is that you need to know what you are trying to achieve when it comes to setting goals. It is important to have specific and detail plan to really achieve your goals.
The first step to setting financial goals is to write them out. You can do this by pen-to-paper, a word document on your computer, or the note area in your smartphone.
The easiest way to create your goals is to put them down in some type of list format. I usually list my goals from most important to less important.
List your goals however you like it is up to you. You want to have your financial goals somewhere easily accessible, preferably where you can see them.
It’s easy to fall into the “out of sight, out of mind” trap.
Types of Financial Goals to Set
There are a variety of financial goals out there that you can set and work towards achieving. You must be willing to evaluate your current circumstance, priorities, and needs to come to a right decision for you.
For example: If you only have a couple of hundred dollars in the bank.
A financial goal should not be saving ‘$500 dollars next month for a new handbag your saw.’ We are trying to get out of debt, not keep debt revolving because of selfish desires.
Delayed gratification is key to setting goals and financial success/freedom.
Get that handbag you when you have 5K to 10K sitting in the bank in savings or an investment account. I am just saying…
Below I have 20+ financial goals examples to help you kickstart your journey.
Here is a list of different types of financial goals that you can set up and strive to achieve:
1. Go Over Current Bills
Mistakes happen, and it seems as if they pop up on bills quite frequently. How closely do you read your statements, receipts, and bills?
Do you take the time to review the actual charges, or do you simply assume that the bill is correct?
Remember that when it comes to numbers, errors happen frequently.
It is estimated that consumers lose billions making unnecessary overpayments on accounts each year. For example, cell phone bills are notorious for being wrong.
Pro tip: Re-examine last year’s taxes. If you have the time and gumption, there may have been a few deductions you may have missed. If they are large enough, the government may owe you money.
Double check your bills to see where you can save some money.
2. Build an Emergency Fund
Do you have any money set aside in a reserve fund in case there is an emergency in your life? Life happens (often), it’s been advised to set aside $500 to $1,000 in your emergency fund.
Until you’re able to set aside 3-6 months worth of living expenses. Oftentimes, setting up an emergency fund is considered a short-term financial goal, and a very important one.
Pro Tip: set aside 3 months of living expenses into emergency account
I recommend this as one of the most important financial goals to set and achieve. An emergency fund will provide you and your family with a sense of security for life unpredicted moments.
3. Payoff Credit Cards & Get Out of Debt Completely
One of the biggest contributors to the ‘hamster wheel of debt.’
New research, found that people do not fully understand how long it would take them to settle their debt if they pay only the minimum payment a certain amount each month.
The study conducted by three researchers from Duke University was presented recently during the Conference on Consumer Financial Decision Making.
According to the experts, there’s a trick to paying your credit card balance the correct way. Paying only the minimum amount due each month is a big mistake.
Understand that when you pay a low amount, what you’re paying will only go to the interest of your debt (if you’re lucky). With high-interest rates and sometimes hidden fees credit cards and any debt really are a wrench to financial freedom.
Make it a point to get rid of them!
The best move to do then is to pay more than the minimum amount required to lower your balance moving forward. This is because when you pay more, a huge part of your payment is then applied to the principal balance instead of going to the interest.
4. Create A Realistic Budget
Please make sure your goals are reasonable and can be done timely. There is nothing wrong with “reaching for the stars” but, your goals should make sense for current circumstance.
Having goals that are a little out of reach can have adverse reactions to the process of setting goals. By creating lofty goals and not having success can be discouraging and may force you to give up altogether.
So I recommend starting off small and when you are the position “to go big with your goals”, you do so.
5. Educate Yourself
There is a plethora of information available on financial topics. Reading books, blogs, and networking are great ways to get educated about financial matters. In addition, many educational and financial institutions offer workshops specifically addressing the needs of those who wish to become more financially savvy.
5. Track your Spending
Simply creating a budget that tracks all income and expenses. Your budget forecasts current and future spending. In addition, it helps you to gain greater control over your finances. Although there are many sophisticated budgeting worksheets available, I recommend starting simple.
You do not want to become overwhelmed or spend extra money developing a method you are unable to maintain. Instead, you may consider downloading an app online.
We use the free app Personal Capital to track our monthly spending.
Your account balances are updated in real time!
Personal Capital is the smart way to track and manage your financial life. We absolutely love it, having all our accounts in one area. We’re able to track our net worth and day-to-day budget needs.
6. Pay Bills on Time
Do you enjoy giving creditors extra money? If you answered no, the best way to prove this is to pay your bills on time. When you pay bills late, you are penalized by paying a late fee.
On top of the interest, you might be paying if you’re carrying a balance. Not only does this create a pattern for poor credit, but it also forces you to pay extra money.
A good rule of thumb is to pay bills before or on the date required. If you pay your credit card bill sooner than usual, you may be able to lower the interest you are charged on it.
This helps you to avoid late fees and moving you one step closer to financial freedom.
7. Open up Multiple Savings Accounts
Ever heard of the cash envelope system? No? Okay – The cash envelope system is a Dave Ramsey inspired method of budgeting. It’s easy to start. First, make separate envelopes for expenses at the beginning of the month.
You can have envelopes for ‘transport’, ‘food’, ‘entertainment’, etc. and put cash in them of how much you think you should spend on each. Spend only what’s in the designated envelope.
If you have leftover cash at the end of the month, (good for you) put that money aside and save it for future emergency expenses. There’s something about parting with cash that makes this method useful. We’ve recently switched over to the cash method and we are loving thus far.
If you were the few who answered YES! Great! Did you know it’s possible to do an online envelope system? Yep! A cashless cash envelope. By utilizing multiple bank accounts online, you can assign clear goals for each account and best part have them ALL out of sight. So, no double dipping. No unexpected Target run. None of that.
Keep in mind to set realistic goals. While some financial experts may suggest a certain percentage to save. To avoid frustration, evaluate your personal circumstances and set goals that are realistic and encourages consistency, and obviously are attainable.
Once you have met your first savings goal, increase it for greater results.
8. Pay Yourself First
Many people do not save because they think that little amount of money will not get the fortune. They try to climb a mountain in one day and end up spending their whole life at the bottom. To achieve every big dream you need to start with a small step. It is better to take many small steps in the right direction than to make a great leap forward only to stumble backward. Start saving from today, even if it is just a penny.
Benefits of paying yourself first.
Paying yourself first is the best personal finance strategy. You will get the same advice even from the top personal financial planner.
- It brings discipline to save – When we start paying our self first, we keep saving as our priority. This is the first step toward abundant wealth.
- We save money from spending on things we do not need – Many times we end up in spending money on things we do not want at that time, just because we have money in our pocket. Sale effect, peer pressure, and many other factors are responsible for the same. If we start saving before spending then our money will start creating more money for us.
- Power of compound effect – I consider compound interest as an eighth wonder of the world. You can’t even imagine how much you can earn by saving early. Use this calculator and see what would be your future wealth.
- Using saved money for a better purpose – You can use the money for emergencies or buy a house or to pay for a child’s education or even for your world tour.
9. Automating Deductions
Talk to your employer about automated deductions and have money from your paycheck automatically transferred into a savings account.
Also, several banks feature programs where a specified amount is automatically drafted from your checking account and deposited into a savings account.
After you get used to the pay yourself first concept, you really won’t miss the money. It is a good idea to put that amount into a separate account, so you will not be tempted to spend it.
Here are three accounts that you should have:
- Emergency Fund
- Enough money to cover the unexpected expenses
- The washer breaks
- Need a new tire for the car
- A job loss
- Short-term Fund
Enough money to cover the things you want in the next few years
- Maybe a vacation
- New car
- New appliances
- Long-term Fund
The saving that will be for the major events in your life
- College funds
10. Create a Sinking Funds
Is sort of like a budget within a budget. Sinking funds are a great way to set a small amount of money aside for future payments. For example, we all know that the house insurance is due every year, that there will be emergencies that we cannot avoid and that Christmas comes around once a year.
The problem is that we do not plan for these events and therefore struggle with having the money to pay for them.
One of the best ways to plan for these items is to create sinking or lump sum funds for them, by setting aside money every month. You can do so by deciding how much money you want or need to put aside for each item.
For example, how much do you usually spend on Christmas?
Decide on the amount and then divide that amount by 12 if you are going to begin doing this throughout the year or if you are getting a late start, divide it by the number of months you have until Christmas or whichever month the item you are planning for is due.
11. Make Extra Income
What a wonderful time to make extra income from home. It truly amazes me how much money can be made online. Many people don’t know about the wonderful opportunities awaiting them out there.
Below – I’ve listed a few examples on how you too can join in and make some cool extra income online.
Start a Blog
Blogging is a great way to make money on the internet. With consistency, and patience you can earn a decent income while working from anywhere!
My blog is allowing me to make money from home online. Allowing me to stay home with our children without causing financial stress to our family. I’ve read so many success stories (me) – I honestly believe (blogging) is a real way to make money from home.
If you are interested in starting a blog of your own, I created a tutorial that will help you start a blog of your own for cheap, starting at only $3.75 per month (this low price is only through my link) for blog hosting. In addition to the low pricing, you will receive a free website domain (a $15 value) through my Bluehost link if you purchase, at least, 12 months of blog hosting.
Rent out your free rooms/cottage
You can use companies/websites such as Airbnb.com to sign up for and advertise your home. Depending on the area you live in/ how much free room you have to rent, you could earn a nice sum of passive income a month.
Take Online Surveys
Many companies will pay you to take online surveys. A simple Google search will take you to several reputable companies. You can make anywhere from $5 on up for each survey.
Even more extra income ideas:
- Make Money At Home: 4 Ways To Make An Extra $1,000 This Month
- First Income and Traffic report One-Year Summary
11. Setup Nest Egg for Retirement
The future is formed by the decision you make today, so it is crucial you start planning and setting up for the future. It’s never too early to start, in fact, the sooner you start the bigger the impact you can make on your nest egg. I am talking differences in 10s of thousands or more
12.. Save Around The Home
There are many ways to save money around the home. Get the whole family on board and save.
- Turn off unnecessary lights
- Lower your thermostat a few degrees
- Use low energy light bulbs
- turn off your computer when not in use
- Hang clothes to dry instead of using the dryer
- Purchase energy efficient appliances
- Ensure that all windows and doors have good seals to avoid heat loss
Many companies today are focused on energy efficiency have their products readily available. Make sure your family is all aware of how to save money around the house so that everyone participates. A good incentive is to let them know that the additional savings from participating can add up and lead to special purchases and trips.
Bonus Fund a 529 plan
If you have kids or planning on have some and you want them to attend college. You want to get familiar with 529 savings plan. In short, it’s like a 401K, but for schooling expenses: tuition, books, etc. Start this early as well.
Three Main Types of Financial Goals
Ok, if you have read this far it would appear that I have managed to maintain your attention. Better yet, my friends, it would appear to me that you care about taken control of your debt and financial freedom. Thumbs up!
We discussed and saw many examples of different financial goals you can use as a starting point to creating your financial budget. Though, there are three main types of goals that can impact different aspects of your goal setting list.
The main three types of financial goals are: short, Intermediate, and Long-term goals.
- Short-term goals – Creating a $1,000-dollar emergency fund in the next three months or paying a little extra towards debt next month.
- Intermediate-term goals – Taking classes to improve your career or saving towards a new car for next year.
- Long-term goals – Saving a down payment for a dream home or saving and growing your retirement fund.
The Reason Why Setting Financial Goals Are Important
Setting good financial goals is important because…. To simply put, it helps us stay accountable.
If we are honest, a lot of us reading this post have no clue how much we have coming in (income) vs. what goes out (expenses) monthly. The fastest way to succeeding with a financial plan is to know what your money is doing.
Trust me when you really sit down and analyze your income vs. expenses it will be eye-opening. You might literally scream or cry. It was an eye-opening reality check for me. I was shocked to see how much I was spending and wasting. Writing out my goals and highlighting my expenses exposed the dependency that I had on my credit cards.
I was living beyond my means.
Setting financial goals is all about efficiently and effectively tracking your money to understand where it goes; so that you can create a plan to properly manage how to spend it wisely.
Creating your financial goals list can be fun and challenging. There is no right or wrong answer. Prioritizing what’s important to you is the key.
The other objective and importance of goal setting are to helps establish good money habits.
It will force you to come face-to-face with your spending problems. Depending on your needs and where you are in life, setting financial goals can help tackle financial issues, like burdensome debt.
A financial budget can be a list that will help give your money direction and purpose. In other words, ‘a plan so you don’t get screwed.’
How to Not Have Your Financial Goals Fail
Think of your needs and what you want to achieve at the current moment and keep it S.M.A.R.T
Find Your Inspiration
What is driving you besides the mountain of debt and bill obligations? We can achieve our goals by letting our passion fuel the path to success.
Ask yourself, ‘Self what do I want out of life?’ Is it financial freedom; More than a couple of vacations a year; the ability to have more time with the family; being able to donate to the charity of your desire.
Examine Your Situation
Once you have your goals it is important to make sure you review them often. Start off weekly once you have established some consistency, gradually review every month.
Making adjustment and tweaks will be necessary as life will happen and things may not always go according to plan. No matter what happens do not give up on your goals. That’s the only way they will ever truly fail.
Check Your Progression
Like recommendation ‘2’ after checking your progress and making adjustment treat yourself. That is right. You have worked hard to this point and have made unexpected changes to your finances and financial habits due to some sacrifices. You can take time to reward yourself with a gift or night out. All within your budget, of course. 😃
The road to financial success is difficult especially if are drowning in a mountain of debt. Oftentime, our financial history is a track record of poor examples. Instead of being taught how to properly set financial goals, we are taught to be mindless consumers.
When we finally decide to snap out of the perpetuating behavior of poor money management, we are at times fighting an uphill battle too much to bear. So, we give up and stop dreaming and fall sheep to status-quo.
I know what you are thinking, ‘a little dramatic’, but that is because I do believe we have a serious financial issue. Most American families barely have any savings for an emergency; are up to their eyeballs in debt; and would be devastated in less than a month if they suffered a job loss and had no income. With a little education and planning, we can overcome this problem.
Setting financial goals is one step that is crucial to helping you and your families enjoy a better life.
Please let me know how writing out a list of financial goals setting goal has impacted your finances.
Great post! Thanks for sharing the knowledge and keep up the good work.
My favourite tip about budgeting is definitely to focus on paying off debt. It’s super boring and unsexy but it makes such a big difference financially! No spend months are super helpful too!
your budgeting tips are really helpful thanks for sharing it.