For some people, their financial goals are to someday be out of debt or have a better handle on their financial situation. But these types of goals don’t lend themselves to an achievable plan, and progress can’t be measured. When we establish financial goals, we assess the things that we need and want in life and associate a timeline and plan to achieve them. Our financial goals need to be realistic, specific, and measurable. Instead of a goal to someday be out of debt, we establish a timeline such as having all of our credit card balances paid off in one year, or our car loan paid off in two years. With a timeline, we can develop a financial strategy to achieve each goal and measure our progress along the way.
Some of our goals will be short-term like saving for a vacation or car, and others will be longer term like owning a home or saving for retirement or a child’s college fund. But they will each require a plan based on the cost associated with the goal and a timeline. If my goal is to save $2,400 for a vacation that I’m going to take in six months, then I establish a plan to set aside $400 each month to achieve the goal on schedule.
If I’m unable to set aside $400 one month, then I’ll need to increase the amount in the following month and keep track of my progress. Without a plan, there would be no way of knowing whether I’m on course to achieve the goal. Vacation time would arrive and then I’d look at my savings to find out if there is enough for the vacation.
Our financial goals also need to be within our means of income and be a part of our spending plans (budgets). If we don’t have control of our spending, then our plans to meet our goals are left to chance. We may buy a lot of stuff that we want, but we’ll be running as fast as we can to keep up with debt, which is a cycle that’s very hard to break.
All of our short- and long-term financial needs and wants form the basis for our list of financial goals. As we establish our goals, they should be specific and have a timeline for achievement so that we can create a workable plan and measure our progress along the way. The financial plans that we develop should be based on our complete financial picture, which allows us to make adjustments to our plans more easily when they’re needed.