Managing your finances is an important aspect of achieving your life’s goals. It can make the difference between living the life of your dreams and only dreaming of it.
Budgeting, figuring out your net worth, and setting goals are essential components of money management. However, the most important one to start with – and the most motivating – is goal setting.
Why is setting a financial goal such a big deal? Can’t my goal be just to make a lot of money then just do whatever I want with it?
Making sure you’re consistently earning income or building a good nest egg are good things to do. Creating a goal, though, puts you on a path to get control of your spending and have money do what you need it to do rather than let it dictate what you’re allowed to do.
Setting goals isn’t as simple a stating you’re going to achieve something and slapping a dollar figure on it. Goal setting is really soul searching. It’s deciding what you want to do with your time and life and devising a plan to achieve those goals to life.
Soul searching is important because, for a goal to be successful, you have to have a strong desire to achieve it. For that to happen, the goal has to align with your core values.
What is a Goal?
A goal is a written statement of what you intend to accomplish and should contain the following:
- what you want to achieve
- why you want it, and;
- when you expect to accomplish it.
Types of Goals
Goals fall into three categories:
- Short-term: attainable within 1 year (buying furniture, building a garage)
- Medium-term: attainable within 1-5 years (sending kids to college, buying a house)
- Long-term: attainable beyond 5 years (ex: retirement goals)
Making Winning Goals!
For a goal to be achievable it must be S.M.A.R.T:
Specific
Measurable
Attainable
Relevant
Time-bound
For example, the statement “I’m going to increase the number of sales of my e-book” is not specific enough and can’t be measured. Therefore, it’s not a S.M.A.R.T. goal.
The statement doesn’t reference the current number of sales and doesn’t have a specific sales figure to work towards. There’s also no time frame assigned. How will you know when you’ve succeeded and how do you check your progress?
A better way to state this as a S.M.A.R.T goal would be: “I’m going to increase my e-book sales from 1,000 to 9,000 within the next 6 months.
This statement is a better choice because:
- It is specific
- It can be measured
- It is attainable
- It is relevant to you (as an e-book seller)
- It is time-bound.
I’ve made a few solid S.M.A.R.T goals. What next?
Setting your financial goals is the kick-off for getting your finances in order. Because goals align with what is important to you, you’ll be motivated to set a budget to save or invest to achieve them.
Don’t stop at setting goals. Get control of your entire financial picture!
Creating financial goals requires you to evaluate your current financial situation. You may know where you want to go, but you need a map to get there, right? And if you use a map, you have to know your current location.
So, along with setting financial goals, everyone (regardless of financial standing) should create these two very important personal finance documents to fully flesh out their personal finances:
- A personal Balance Sheet, and
- A Net Worth Statement
These documents may sound intimidating, but they’re very easy to create. I’ve created other blog posts all about these documents, but information can also be found everywhere on the internet.
Once you’re very clear on where you stand financially and have set goals to achieve, create a budget to use as a tool to manage your money to achieve those goals.
Congrats! You’ve won the race!
Do you have life goals you would like to achieve? Have you set up any short, medium, or long-term goals for yourself? Let’s hear it! Leave a comment 🙂