How often in life have you been able to accomplish something without first defining what it is that you’re attempting to do? For example, have you gotten a new job without first deciding to apply for it? Did you purchase a new car without first contemplating your options and then deciding it was time for an upgrade? It’s likely that in each of these circumstances your first step was to identify your goal(s) and from there establish a plan of attack to reach them. The same scenario applies to organizing your financial life. One of the very first steps in financial planning is setting goals. Setting goals allows you to define your hopes and dreams for your future, both short and long-term.
When thinking about and setting your goals, ask yourself what would have to happen in the next 3, 5, 10+ years in order for you to be happy. From there, begin to document and shape your goals and ensure that they are S.M.A.R.T.
S.M.A.R.T. goals are:
For a goal to be specific, the more details, the better! You want your goals to include as much information as possible. For example “I want to save $25,000 for a down payment on a home in the next 4 years” is a goal that answers “how much?” “how long?” and “what for?”
Measurable goals should enable you to monitor your progress. How close are you to meeting your goal? How much more do you need to save?
Attainable goals are those that are realistic in nature. While we may all want to win the lottery or have a huge house or great new car – your goals should be set within reach. Perhaps maxing out your 401(k) contribution, taking advantage of a Roth IRA, or building up a sufficient emergency savings is a good place to start.
You want your goals to be relevant to your life. Your goals should reflect your and your family’s needs, values, and desires. Make sure your goals are meaningful to you or else you won’t be motivated to achieve them.
Timely goals are those that come with a deadline. Ask yourself how long it will take you to accomplish your goal. Working within a timeframe allows you to better track your progress.
When setting your financial goals, remember to write them down, prioritize them, and keep them in a place where you can see them often. Include your significant other or family in the goal setting process to make sure you’re all on the same page. Your goals will be the groundwork of any financial plan you create. Not only will having clear vision of what you hope to accomplish keep you on track, but you will be inspired to stay organized and turn your dreams into a reality.