November 4 2016
Going through life without a financial plan is like taking a trip to a new destination without a map or a GPS. How will you reach your goal without knowing what route you should take? In the same way, setting clear financial goals based on what you'd like to achieve is imperative if you intend on successfully reaching those goals.
Benchmarks are your signposts to show where you are on the roadmap on the path to achieving your financial goals. By breaking down each goal into smaller steps, you'll quickly see where you've gotten off track. One of the main reasons people fail to meet their financial goals is because they don't see progress. When you set those smaller goals, you'll be motivated to keep going as you reach each one.
Goal setting is the first step. Most importantly, clearly defined goals will help you clarify your choices. All of your choices should guide you towards your end goal. While there is no one correct was to go about goal setting, it helps to follow some basic steps:
1. Determine your wants and your needs. List everything you must have in one list and everything you'd like to have in another.
2. Set a timeline for each of your wants and needs. Group them into short-term (1-5 years), intermediate-term (5-10 years), and long-term (10+ years) priorities.
3. Prioritize your wants and needs. Assign a 5 point rating for each, where one is most important, and five is least important. Choose the top three on each list; these are the ones you'll work towards first. It goes without saying that needs take priority over wants. Sorry, putting money aside for a six-month emergency fund is more important than an expensive vacation. Next, prioritize based on timelines. Your important short-term goals will take precedence over long-term goals.
4. Put a dollar amount on it. How much will it cost to reach each goal? Do your best to get an accurate estimate. Doing so will help you calculate the money you'll need to save to achieve each target.
5. Visualize it. Think about how you'll feel if you reach each goal. People are more likely to meet goals if there's an emotion attached to it. You may even find that you end up reprioritizing your goals after this.
6. Set milestones. Each goal should be broken down into smaller goals. It will be more motivating and easier to reach when you have smaller, more frequent targets for which to aim.
7. Determine your action plan. Develop action plans. Create a separate action plan for each goal including concrete steps, timing, milestones, and a tracking log. Include any steps you will need to take to educate yourself on a type of savings or investment program.
8. Hold yourself accountable. Share your goals and plans with your partner, your family, or a friend. Ask them to check in with you on a regular basis to see how you're progressing. Hold monthly or quarterly meetings with your spouse to evaluate your plan and see if you're still on target to reach your goals.
With clearly defined goals, you will be able to follow the road map and reach your destination while avoiding the pitfalls of poor planning and unexpected surprises.
Like a great GPS, we've helped many families and businesses reach their financial plan destinations. Call or email us today to set up a time to review your roadmap to wealth and savings.
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