Advertising
Advertising

Last Updated on November 27, 2020

How to Set Financial Goals and Actually Meet Them

How to Set Financial Goals and Actually Meet Them

Personal finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. That’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

In this article, we will explore ways to set financial goals and actually meet them with ease.

4 Steps to Setting Financial Goals

Though setting financial goals might seem to be a daunting task, if one has the will and clarity of thought, it is rather easy. Try using these steps to get you started.

1. Be Clear About the Objectives

Any goal without a clear objective is nothing more than a pipe dream, and this couldn’t be more true for financial matters.

It is often said that savings is nothing but deferred consumption. Therefore, if you are saving today, then you should be crystal clear about what it’s for. It could be anything, including your child’s education, retirement, marriage, that dream vacation, fancy car, etc.

Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives that you foresee in the future and put a value to each.

2. Keep Goals Realistic

It’s good to be an optimistic person but being a Pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going beyond what you can realistically achieve will definitely hurt your chances of making meaningful progress.

It’s important that you keep your goals realistic, as it will help you stay the course and keep you motivated throughout the journey.

3. Account for Inflation

Ronald Reagan once said: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman.” This quote sums up what inflation could do your financial goals.

Therefore, account for inflation[1] whenever you are putting a monetary value to a financial objective that is far into the future.

For example, if one of your financial goal is your son’s college education, which is 15 years from now, then inflation would increase the monetary burden by more than 50% if inflation is a mere 3%. Always account for this to avoid falling short of your goals.

Advertising

4. Short Term Vs Long Term

Just like every calorie is not the same, the approach to achieving every financial goal will not be the same. It’s important to bifurcate goals into short-term and long-term.

As a rule of thumb, any financial goal that is due in next 3 years should be termed as a short-term goal. Any longer duration goals are to be classified as long-term goals. This bifurcation of goals into short-term vs long-term will help in choosing the right investment instrument to achieve them.

By now, you should be ready with your list of financial goals. Now, it’s time to go all out and achieve them.

How to Achieve Your Financial Goals

Whenever we talk about chasing any financial goal, it is usually a two-step process:

  • Ensuring healthy savings
  • Making smart investments

You will need to save enough and invest those savings wisely so that they grow over a period of time to help you achieve goals.

Ensuring Healthy Savings

Self-realization is the best form of realization, and unless you decide what your current financial position is, you aren’t heading anywhere.

This is the focal point from where you start your journey of achieving financial goals.

1. Track Expenses

The first and the foremost thing to be done is to track your spending. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you will be surprised by how small expenses add up to a sizable amount.

Also categorize those expenses into different buckets so that you know which bucket is eating most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pumping up your savings rate.

If you’re not sure where to start when tracking expenses, this article may be able to help.

2. Pay Yourself First

Generally, savings come after all the expenses have been taken care of. This is a classic mistake when setting financial goals. We pay ourselves last!

Advertising

Ideally, this should be planned upside down. We should be paying ourselves first and then to the world, i.e. we should be taking out the planned saving amount first and manage all the expenses from the rest.

The best way to actually implement this is to put the savings on automatic mode, i.e. money flowing automatically into different financial instruments (mutual funds, retirement accounts, etc) every month.

Taking the automatic route will help release some control and compel us to manage what’s left, increasing the savings rate.

3. Make a Plan and Vow to Stick With It

Learning to create a budget is the best way to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be organized

Nowadays, several money management apps can help you do this automatically.

At first, you may not be able to stick to your plans completely, but don’t let that become a reason why you stop budgeting entirely.

Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options, and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

4. Make Savings a Habit and Not a Goal

In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that, in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

Make savings a habit rather than a goal. While it might seem to be counterintuitive to many, there are some deft ways of doing it. For example:

  • Always eat out (if at all) during weekdays rather than weekends. Weekends are more expensive.
  • If you are a travel buff, try to travel during off-season. You’ll spend significantly less.
  • If you go shopping, always look out for coupons and see where can you get the best deal.

The key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice, which will be harder to sustain over a period of time.

Advertising

5. Talk About It

Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission.

Therefore, in order to stay the course, surround yourself with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

6. Maintain a Journal

For some people, writing helps a great deal in making sure that they achieve what they plan.

If you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

When you have a written commitment on paper, you are going to feel more energized to follow the plan and stick to it. Moreover, it is going to be a lot easier for you to track your progress.

Making Smart Investments

Savings by themselves don’t take anyone too far. However, savings, when invested wisely, can do wonders.

1. Consult a Financial Advisor

Investment doesn’t come naturally to most of us, so it’s wise to consult a financial advisor.

Talk to him/her about your financial goals and savings, and then seek advice for the best investment instruments to achieve your goals.

2. Choose Your Investment Instrument Wisely

Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about the common ones, like a savings account, Roth IRA, and others.

Just like “no one is born a criminal,” no investment instrument is bad or good. It is the application of that instrument that makes all the difference[2].

As a general rule, for all your short-term financial goals, choose an investment instrument that has debt nature, for example fixed deposits, debt mutual funds, etc. The reason for going for debt instruments is that chances of capital loss is less compared to equity instruments.

Advertising

3. Compounding Is the Eighth Wonder

Einstein once remarked about compounding:

“Compound interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.”

Use compound interest when setting financial goals

    Make friends with this wonder kid. The sooner you become friends with it, the quicker you will reach closer to your financial goals.

    Start saving early so that time is on your side to help you bear the fruits of compounding.

    4. Measure, Measure, Measure

    All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments and taking stock of how our investments are doing.

    If we don’t measure progress at the right times, we are shooting in the dark. We won’t know if our saving rate is appropriate or not, whether the financial advisor is doing a decent job, or whether we are moving closer to our target.

    Measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

    The Bottom Line

    Managing your extra money to achieve your short and long-term financial goals

    and live a debt-free life is doable for anyone who is willing to put in the time and effort. Use the tips above to get you started on your path to setting financial goals.

    More Tips on Financial Goals

    Featured photo credit: Micheile Henderson via unsplash.com

    Reference

    More by this author

    Ankit Garg

    Serial entrepreneur and working towards Early Retirement

    How to Work More Efficiently and Stop Rushing to Meet Deadlines 10 Best Ted Talks About Procrastination That Will Ignite Your Motivation How to Set Financial Goals and Actually Meet Them 10 Ways to Build Positive And Effective Work Relationships 17 Practical Money Skills that Will Set You Up for Early Retirement

    Trending in Goal Getting

    1 How to Start Taking Action on Your Goals and Dreams Now 2 10 Ways To Turn Your Big Dream Into Reality 3 How To Make Your Dreams Come True in 9 Simple Steps 4 How To Use Goals and Dreams To Achieve Personal Success 5 Stop DREAMING, Start LIVING… Why We Need to Take Action

    Read Next

    Advertising
    Advertising
    Advertising

    Last Updated on April 8, 2021

    How to Start Taking Action on Your Goals and Dreams Now

    How to Start Taking Action on Your Goals and Dreams Now

    I’m going to tell you the secrets on how to start taking action on your dreams. When you decide to turn thoughts into action, there are specific, actionable steps you can take to move forward.

    The first thing I want you to do is think back to when you were a child. Our childhood selves hold many of the secrets to realizing our real life dreams. Think about what you loved to do most and how you told yourself it was possible without worrying about what might get in the way. I’d like you to reconnect to your imagination and playfulness.

    By taking the following steps, you’ll do some playing and storytelling to reveal your dreams and start making them come true.

    1. Tell Your Story

    Your life story is unique and has brought you here today. The next chapter of your life is in your power to write and to realize by taking action. Not everything that happens to you is in your control[1], but the actions you take and how you choose to feel about what happens are in your control.

    Finding out what our future lives and dream lives might look like can be done effectively through the eyes of our childhood selves.

    Can you remember what you loved to do most as a child? Maybe you enjoyed collecting things like me–I always had a collection of pebbles in a carrier bag that smelled of seawater nestled under my bed. Perhaps you loved taking care of your pets: I had a dog, a tortoise, and many guinea pigs. Or maybe you were really great at making stuff.

    You can use the instincts, passions, and skills you had as a child to fuel your progress toward your adult dreams.

    I’m inviting you to really think about what you wanted to be when you grew up[2] and the memorable activities you enjoyed as a child, the ones that gave you a real sense of freedom and excitement, or the pursuits that you truly lost yourself in.

    Advertising

    What we call getting into our flow state[3] as an adult is what came naturally to us as children. So, go back there now and think about how that felt. It may clue you in to what still remains true and important to you today.

    2. Define Your Dream

    The first secret when you want to start taking action on your dreams is to know what they are. This sounds obvious, but so many people only have a loose definition, such as: “more free time,” or “more money.” Busy people know there is something else to life apart from slaving away for a job, or a boss they don’t like, but if you’re too busy to even know what your dream looks like, how can you make it come true?

    Once again, I’d invite you to connect to the optimism and playfulness of your childhood self. Go back to thinking about what your dreams involved at age seven or eight. Some of those may still be what you want today.

    Now, write down what it is that you want and when you want to achieve it. Note down how you’ll know when you’ve got there and made this dream come true. How will you measure your success? Be as specific about your goals as you can.

    A study at the Dominican University in California[4] proved that writing down your goals, accountability, and commitment are three key ingredients to successfully achieving our goals and learning how to take action.

    This step also involves building motivation for the steps to come. If you need help in that area, check out Lifehack’s free Ultimate Worksheet for an Instant Motivation Boost.

    3. Picture Your Dream Coming True

    Think about exactly how it will feel when you start taking action and ultimately achieve your dream, the sense of freedom and excitement. Imagine it in as much detail as you can with all five senses. If you’re finding it hard to imagine a different life, imagine a childhood memory with all its sensations.

    As a little girl, I loved to ice-skate, making huge swirly patterns across clean expanses of beautiful glistening ice. The feeling of freedom, of trust in myself to balance, of speed. It felt very immersive, the coldness and my breath turning into little clouds in front of my face.

    Advertising

    Imagine a childhood memory like this, and then imagine the future you want, with as much detail and attention paid to how it looks, feels, tastes, smells, and sounds.

    Draw, paint, speak, or write your future story.

    If you loved to create pictures like I did as a child, or write stories, or play on the computer, use your natural creative skills and what you love doing to map out your exciting future. You could create a picture, vision board, written story, or audio file.

    Then, let’s put that future story somewhere you can easily access it. Make sure that you include a timescale for when you want to achieve this dream by, how you will measure your success, and what you need to get there. If possible, start breaking your dream down into small, manageable steps.

    4. What Part Do You Play?

    You can’t control everything, so you need to be realistic about your role in taking action and making your future dreams come true. Think about where you need help. During childhood, we were not afraid to ask for help from a parent, friend, or sibling to realize our dreams and plans.

    Whatever we needed, our eager and enthusiastic childhood selves would reach out for support. We’d be resourceful with whatever we had to make our creative ideas a reality.

    As adults we also need to ask for support and help, and at the same time to notice what is in our control and what we can do to take action today towards our dreams.

    5. Who Can Support You?

    If you’ve noticed you need a bit of help, then get your tribe together. Which friends can cheer you on, and which can connect you? Who in your family will indulge in your dreams with you? What about the pragmatic ones who might help you work out what you need to get there?

    Advertising

    Whether you need someone to check in on you and see how you’re progressing, or need a buddy to brainstorm with to help the ideas flow, bring a few of your friends into the plan to help you move forward. Successful people know that the habit of taking action is best built with help.

    6. Ensure Your Dream Is Realistic

    Maybe the dream you’ve outlined just feels impossible. It costs too much or will take too much time to achieve. Instead of telling yourself “no, but,” try the “yes, and” approach. This is much more representative of how a child’s mind works.

    When we were little, we weren’t scared to fail, as failing was not a concept to us back then. Let’s harness some of that kid energy and see how “yes, and” can move us forward when our dream feels unrealistic.

    Let’s look at an example: maybe your dream is to have a hit record, and you think you can’t sing, or you don’t believe you have any musical talent. Instead of closing that down, if we “yes, and” it, we can say: “I want to have a hit record. Yes, and there are so many ways to achieve that. Some people have a hit record by working for a music business, and others might design the cover art. Some people speak on records instead of singing… yes, and someone has to write the lyrics or have the idea for the song. Yes, and I know someone who organizes a choir every Christmas at their local bar, and everyone in the bar is on the record. That amateur choir even got on TV as it was so much fun and all the money went to charity.”

    So, before you decide your idea is unrealistic, try “yes, and-ing” it to see how you can start taking action on your dreams, even if you think it sounds impossible!

    7. Use Small Wins and Rewards

    On your journey toward achieving your dream, there will be small wins and important milestones; it’s not just about going straight to the destination. Measuring your progress is important and can be a chance to celebrate.

    Finding a way to measure it that is visible can really help. Whether it’s a chart or an app, whatever you choose, following and celebrating your progress is key, and celebrating that win is part of the joy. Being in the process and on the journey is just as important as reaching your target. Celebrate with the happiness of a small child: do a dance, take a photo, tell your friends.

    8. Update the Map

    You might find the plan you made isn’t working for some reason. Things have changed, and your goals and targets are not working out for you . Let’s look at how you can change things up and put new life and energy into the project.

    Advertising

    Take it apart and put it back together again, but start small. Define the new plan and the new goals, and start on the next phase of the journey, equipped with the knowledge and learning from what didn’t work last time you tried to put your thoughts into action.

    9. Make Space

    Achieving our dreams might mean losing something else, and that’s ok. It could be a literal swap, such as giving up wine to save money towards the goal. Or it could be something more ideological, like giving up saying yes to everything to make more time to focus on your pursuits. Think about what you can give up to make space for taking action on your dreams.

    10. Use Your Superpower

    What’s your superpower? Use this to take action on your dreams today! Perhaps you’re awesome at using your network to find solutions to problems. If that sounds like you, then consider picking up the phone and start asking for some ideas and connections.

    If you prefer to research, get reading or watching TED talks and presentations to find practical ways to achieve your particular dream. Who else has overcome a similar problem? How did they do it? What can you borrow from what they learned, and what can you learn from how they won or lost along the way?

    11. Keep Your Energy up

    Remember to take a rest and recharge on the journey towards taking action on your dreams. Take breaks, eat and sleep well, exercise, and listen to and tune in to what your body and mind needs to thrive.

    Final Thoughts

    Achieving your dreams is unlikely to be an overnight task. It’s more likely to be a winding road with setbacks, lessons, obstacles, and new discoveries. It might take years, but every step, no matter how tiny, can be enjoyed, even the struggles. Maintaining a mindset around enjoying the journey will really equip you to thrive and see those ambitious dreams become a reality.

    More to Get You to Take Action Towards Your Dreams

    Featured photo credit: Tom Rogerson via unsplash.com

    Reference

    Read Next