6 Steps to Create and Achieve Your Financial Goals
One of the most important parts of your financial plan is your goals.
In order to find clarity and reduce our guilt around our spending, we have to have clear goals.
That means knowing how much we need for each goal, by when we will achieve it, as well as which goal comes first.
Is it more important to me to pay off ALL of my student loans before saving for my future home? Do I want to aggressively save for retirement (and retire early!) or take an extra vacation each year?
Knowing the answers to these questions helps everything else fall into place.
It provides clarity and confidence in our financial plans and reduces our worry and guilt. Yes, please.
List out your goals.
You know all those things you've always wanted to do, have, and experience? You should do, have, and experience them! Set a timer for 10 minutes and let yourself dream about what you want.
Do you want to create a rainy-day cushion, pay down your credit card debt, spend within your means, start investing, or take a two-week vacation?
Privilege and goals.
We can’t talk about goals without talking about equity. Privilege and inequity are at the center of our goals.
Having college paid for and graduating without student loans is privilege. Being able to borrow money from family to start a business is a privilege.
Earning $0.82 on the dollar for the same work because you’re a woman, $0.63 because you’re a Black woman, $0.60 because you're a Native American woman or $0.55 because you’re Latina makes it that much harder to save for your goals.
We aren’t starting from the same place or encountering the same discrimination and barriers along our money journeys. What’s possible or realistic for each of us when it comes to our goals is so intertwined with privilege and inequity.
So while yes, we can always make smarter money moves, try not to compare yourself with others. You have no idea what their journey has been like or where they started financially.
Prioritize your goals.
Number each of your goals above in order of priority, with number one being your highest priority. You can prioritize based on what's most important to you, the timing of the goal, or the urgency.
Turn your goals into SMART goals.
SMART goals are specific, measurable, attainable, relevant and time-bound.
Specific - Describe the goal. What exactly do you want to achieve?
Measurable - What exactly will you have, hear, or feel when you achieve your goal? With money goals, this is the amount.
Attainable - Is it possible? Is the outcome in your control?
Relevant - Is it worthwhile / motivating? Are you willing to put in the work to achieve it?
Time-Bound - By when?
“Save more money” becomes “I’ll save $3,000 towards my rainy-day fund this year by saving $250 per month.”
Decide how many goals to work towards.
When we focus on one goal, we achieve it faster, because all of our savings go toward that one goal. Yet, it’s often difficult to choose which goal gets top priority. When we work toward multiple goals, we make progress on many things that are important to us. Because progress is shared, it takes longer to achieve any one goal. Typically focusing on 2-5 goals works best.
Make a plan.
If you want to save $3,000 for a particular goal over the next year, you’d need to save $250 per month. Decide next where you will put that money. If you’re paying down debt, the funds will go directly towards your debt payments. If you are saving for something, you might create a separate savings or investment account for that particular goal.
Track and celebrate your progress.
When we track our progress, it can motivate us and help us see how far we’ve come. It also gives us an opportunity to celebrate! Track your progress for each goal and decide how you’ll celebrate your milestones along the way.