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How to set financial goals

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Do you ever feel like you’re trying so hard to get closer to your financial goals, but you’re just going around in circles?

The thing is, if you don’t define your financial goals, you’ll always be struggling to reach them. It’s like trying to throw an arrow in a random direction, and expecting it to hit a target – it probably won’t. By setting your eyes on the prize, it will be much easier for you to channel your efforts in the right direction.

What are financial goals?

Financial goals are the money related targets you aim to hit, such as saving up to buy a house or paying off credit card debt. These goals are specific and measurable milestones that, when reached, bring you closer to your ideal future. By identifying something you want to buy, pay off, or experience in the future, you can come up with a plan to get the money it requires.

Identifying your financial goals

Now that you’ve decided to set some financial goals – it’s time to be very honest with yourself. If your goals don’t align with what you actually want, it will be really hard to stick to them during difficult times. Spend some time imagining what you want your life to look like before determining your financial goals. Writing them down will make you much more likely to achieve them, and will help you refer back to make sure you’re on track. Here are some examples:

Short term goals
  • Paying off your credit card 
  • Increasing your salary
  • Buying your mom that gift she deserves
  • Saving up for a vacation in Europe
  • Creating a source of passive income
Long term goals
  • Buying a house
  • Starting a successful business
  • Not having to work for money
  • Saving up for retirement

Putting your plans to action

The next step is to create an action plan, to help you turn these goals into reality. A great method to use when coming up with objectives is to ensure that they’re SMART. 

Specific – I want to start my own business, and the starting cost is $12,000

Measurable – I want to save $6000 per year, which is $500 per month, and $16.4 per day.

Achievable – My budget includes $800 of disposable income per month, which allows me to afford putting in $500 per month.

Relevant – I have the skills and expertise to start this business, and according to my income and expenses this past year, I should be able to afford putting in this money.

Time-bound – I want to save $12,000 to be able to start my business in 2 years.

After doing this for all your goals, you then need to stick to this plan, measure your progress, and celebrate your achievements. This plan will act as your map, allowing you to take small but intentional steps in the right direction.