Setting and Achieving Financial Goals

Introduction

Unless you were born into one of the 10% of families in the United States that earn 90% of the country's income (or whatever the new statistic is), you have probably at one point in your life (possibly even right now) wished you were in a better position financially. For whatever reason, you would like to have more money and are wondering about what would be the best way for you to obtain it. Some turn to a second or third job. Some turn towards the stock market. Millions of people are currently relying on the state lottery systems scattered throughout the country. Is that what you want for your life? Always working and never having free time to enjoy, or always relying on a system that doesn't guarantee success don't seem to be the right options to improve your financial situation.

When the average American is asked what they would like to have or accomplish in their life, most will respond with something financially based. This doesn't mean that they are all hoping to become millionaires, but whatever they want to achieve will require some financial status that they currently don't have. However, some will actually respond that they want to become millionaires and live the lifestyle of the rich and famous. Well, contrary to what Robin Leach made us believe, there are more millionaires living the same lifestyle that you and I enjoy than we are probably aware of or willing to accept. They could live a more lavish lifestyle but don't. The following are characteristics of many millionaires that we could adapt in our own lives to help achieve the financial status we want.

• They live below their financial means. Guess what happens with the extra…savings accounts and other investments that earn interest.
• They lead frugal lifestyles. Again, extra money to go into savings and other investments.
• They're self-employed or own their own businesses. Something to learn about goals and achieving them from this fact.
• They plan and study investments. Security instead of recklessness…a good trait.
• They weren't always at the top of their class. So, if you weren't the valedictorian, you still have a shot.
• They're self-made. They didn't receive a huge inheritance from a long-lost uncle or anyone else. They worked and earned it.

So how does this relate to setting financial goals? It shows us that through the right research, determination, and work, you can achieve the financial status that you aim for.

First Things First

The first step that you need to take to achieve the financial health that you are looking for is to learn what really drives you when it comes to money and how it can help you to achieve your dreams. Once you know what drives you, you can take the right attitude towards turning those dreams into goals and moving forward to accomplish them. Your attitude towards money will also help determine how much you will need to achieve your goals, how hard you are willing to work for it, and how you will feel when you achieve it. Summed up, you need to know yourself, what drives you, what you want, and what you are willing to do to get it.

Without setting goals, you may be dissatisfied with where your life is going and how you are using your financial resources. We may find ourselves drifting along and leaving our future up to chance. From a financial point of view this could be very dangerous. You need to plan financially for your future so that you can have one outside of the workforce when you are 82 years old. If you ever want to retire, own your own home and car, or be able to survive day to day without worrying where tomorrow's dinner will come from, you need to set financial goals.

The Game Plan

An unknown wise man once said, "Most people don't plan to fail, they fail to plan." For you to succeed, you need to plan for it. This is where setting goals takes place. Following are some simple steps to setting financial goals.

Step 1 - Identify Goals

Identify what goals you have and write them down. Why is it so important to write down goals? Well, some people will say it is only a dream if it isn't written down. Whether they are correct or not is for you to decide but there is at least a little bit of wisdom in the statement. Think about it, a goal is specific, it states what you want to accomplish, and they should be an extension of your personal values. When you write them down, it is as if you are signing a contract with yourself to get something done. A written goal will be a visual reminder of what you are working for. You won't forget details. You probably won't get off track. In fact, to further keep you on track with your goals, make sure that they have a beginning and an ending date.

Establishing your financial goals, writing them down, and establishing due dates for them is just as critical and actually accomplishing them. Those that have gone through this process will tell you that it is important to have your goals in writing if you sincerely want to accomplish them.

Step 2 - Break Them Down

Break each financial goal down into several short-term (less than 1 year), medium-term (1 to 3 years) and long-term (5 years or more) goals. For the short-term goals, think about what you would like to achieve during that time period. This could be anything from paying off a credit card or student loan to being able to invest $100 per month into an investment or savings account.

For long-term goals, think about the things you would like to achieve before you die…or sooner. For example, having the mortgage paid off 10 years before you retire, along with the goal of retiring before you are too old to enjoy retirement. Maybe that short-term goal of an investment account will help achieve this long-term goal.

Some people may consider one goal to be short-termed while someone else may consider it to be medium-termed. Likewise, other people may consider long-termed a goal that someone else can accomplish in the short-term. You need to make sure that when you write these goals down with beginning and ending dates that you are making sure the timeline fits what you can accomplish. Each person is different and shouldn't base their goals on anybody else's timeline.

Step 3 - One Step Further

Take the goal establishment that you have done in step 1 and 2 and take it one step further. Make these goals as specific as you can. Statements such as "I want to retire when I turn 55" is not inappropriate. It is as specific as it can be. "I want to be rich when I retire" may not be specific enough because you have to define what "rich" is. A statement like "I want to have three million dollars in investments and savings to retire on" may be more appropriate for that goal.

Specific details don't mean that you are removing any and all flexibility to make a change to the goal later on. It actually means that you have more freedom to make changes to the goal. The specifics will help you to stay on track, which will make it easier to identify a situation which may require you to alter or adapt you goal to be more realistic with the direction your life is going.

Step 4 - Make Goals Actionable

Make your goals actionable. What does this mean? It means - make sure that the goal is something that you can actually work on. If you can't work on a goal, how will you achieve it? Likewise, you need to start taking action immediately. If your start date is sometime in the future, make sure that you take action on that start date and keep acting on it. A goal that starts with "someday" will never happen because it won't be specific enough, it won't have a timeframe attached, and you won't be motivated enough to work on it right now.

Step 5 - Educate

Some people may not consider this a step in creating financial goals and working towards them but the next step is to educate yourself on what will need to be done to accomplish your goals. You may think that this should be done earlier in the process and you may be right. However, if you have gotten this far in the process and haven't educated yourself yet on what you will need to do, this is a great time to learn. It may delay the actions that were talked about in step 4 but it will make it easier to follow through with those actions.

Step 6 - Evaluate

Evaluate your progress. In step 3, you identified the specifics that you will need to do to accomplish the goal. Now in step 6 you can evaluate how you are doing with those specifics. Remember, specifics don't take away the freedom to make changes to your plan. You will see that with some of your goals, flexibility is a necessity. Well, in step 6 you may see a need to modify your plan. Go right ahead. It is your goal and you can do whatever you need to do to accomplish it while still holding true to your values (it shouldn't be a goal if it makes you go against your values). Besides, there will be outside forces that may force you to modify the timeline or other factors. A bad economy may stretch the time frame out a couple of extra years. Likewise, an inheritance from your Aunt Martha may help to shorten the time frame.

Evaluation is your flexibility. It is also what will keep you on track. How often you evaluate will depend on your own situation. It will also depend on the goal. Long-term goals may only need to be evaluated once per year because of the time frame. Some short-term goals may need to be evaluated weekly, or even daily. If you are really intent on accomplishing the financial goals (or any other goals for that matter) that you have set, you will evaluate them at the time that they need to be. Be confident in your abilities to work on a goal and maintain that confidence as you evaluate. This leads us to the last step.

Step 7 - Don't Give Up

Don't give up. There are basically three situations that should cause you to stop working on a goal: you accomplished it, you died, or your life situation changed so drastically that it is no longer a priority or even a desire. If the reason doesn't fall under one of these three categories it better be a good reason, otherwise you should never have identified that goal as something that could in all reality be achieved.

Get To It. . . . If you haven't already started working on your goals, now is the time. There are things that you can learn and do along the way that will help you. Because of the fact that some goals are financially based, you will need to make a budget part of the process to help you accomplish the goal. After all, you have to have control over your financial life as much as possible to accomplish financial goals. Budgeting will help you to have that control. If you are new to budgeting, take a look at the next article in this section. It will teach you what you need to do to create and maintain a budget. If you already use a budget, congratulations! If not, it is time to start.

Good luck, and if your goal is to become rich, please remember those that helped along the way. Providence is best enjoyed when it is shared.