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Last Updated on November 27, 2020

How to Set Financial Goals and Actually Meet Them

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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.

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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!

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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.

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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.

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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

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    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

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    Published on September 16, 2021

    What Are Process Goals? (With Examples)

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    What Are Process Goals? (With Examples)

    Ready. Set. Go. For years, this was my three-step mindset when it came to goals. I would reach for the moon and hope to land among the stars without feeling the pain of the fall. This approach was all or nothing, and as a result, I experienced loads of burnout and almost zero productivity. In short, my task list was filled with high-level intentions, but I hadn’t taken the time to create a map to reach the destinations. I was lost in the planning stages because I didn’t understand process goals or have any examples to follow.

    Since then, I’ve learned how to embrace the journey and break my outcome goals into smaller and more manageable process goals. This approach has improved my focus and reduced frustration because I’m now working towards a surefire strategy that will take me where I want to go––I’m creating a plan of action with achievable daily targets (a process goal).

    What Is a Process Goal?

    A process goal is not a destination, it’s the path you plan on taking to get there. For example, if you want to become better at writing, your process goal would be to post one blog article per week and learn from the feedback you receive. The destination is a monthly goal of 12 articles.

    This distinction is important because it’s easy to lose sight of the fact that these types of goals are not all or nothing. Think about it. You’ve heard it said: it’s not about working hard but working smart.

    Well, a process goal is an actionable target with what we call SMART criteria:

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    • Specific – The more detailed your goal, the better. For example, instead of “I want to be fit,” you would say, “I want to lose five pounds.” Make sure your goal is crystal clear.
    • Measurable – You need a way to measure progress and success, so it needs to be quantifiable. This is where you decide what “fit” actually means for you (more on this later).
    • Achievable – If your goal isn’t challenging, then it’s not going to be motivating. On the other hand, there must be a steeper mountain to climb if you want substantial results.
    • Realistic – “I want to run a marathon” is not practical for most people. Ensure you have the time, energy, and resources (e.g., training program) required to achieve your goal.
    • Time-Bound – Your goal needs an assigned deadline or it’s just a pipe dream. There’s nothing wrong with dreaming, but what happens when the fantasy ends?

    To summarize, these are the essential components of any process goal: specific, measurable, achievable within a certain time frame, and realistic.

    What Is a Destination Goal?

    A destination goal is a point in time when you plan to be at a particular destination. For example, if your goal is to get to represent your country at the 2025 Summer Olympics, you right need to focus on smaller increments to attain that success. On your way to that goal, you need to focus on smaller destinations. First, make the national team. Then, compete in a few events and so forth.

    If you try to make it to the Olympics from the very start without any milestones along the way, it would be too daunting. On the other hand, if you focus on each milestone as a destination goal, it will all seem possible and achievable.

    Process Goal Template

    Let’s say you want to become a better cook. Here is one way of writing the process goal: “I will save $100 per week by cooking all my meals at home for 12 weeks.” This would be your destination (monthly), and the steps required to achieve this goal (weekly) would be:

    1. Spend one hour on Sunday planning my meals for the week.
    2. Shop for groceries after work on Monday and Tuesday nights.
    3. Cook all meals at home on Wednesdays through Sundays.
    4. Pack my lunch for work on Mondays and Tuesdays.
    5. Save $100 per week in cash by cooking at home.

    This process goal will help you become a better cook by teaching you to save money through planning, shopping, cooking, packing your own lunch, and trying new recipes. It also includes a weekly reward (saving $100 in cash) that will help you stay motivated.

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    Process goals encourage you to reach your ultimate goals. When you feel like you can accomplish smaller goals along the way, you gain sustainability and confidence to move forward.

    In many ways, process goals are a lot like faith. Each accomplishment brings you closer to seeing the fullness of the life that you desire––it breaks through the fog and makes things clearer.

    What Questions Helped Me Find My Process Goals?

    After several years of setting lofty goals and becoming increasingly frustrated when I wasn’t getting the results I wanted, I decided to take a closer look at my approach.

    Now, there are many ways you can do this, but here’s how I went about it. Last year, I asked myself the following questions:

    • What am I doing right now?
    • How can I get better at this?
    • Is this process goal leading me closer to my ultimate goals?

    The choices I made from the answers to these questions became my process goals. They were the driving force that kept me motivated and moving forward when I wanted to give up and throw in the towel. Since then, I’ve been able to accomplish lifelong goals that I had given up on years ago. For example, I’ve been able to obtain a publishing contract, create more digital products for my business, and enjoy the moment.

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    Before I broke down my goals into smaller ones, I was struggling to just get out of bed. The thought of my endless list kept me stagnant. Now, I look forward to each morning and taking on smaller projects to reach profitable outcomes.

    What Are Some Process Goals You Can Try?

    So, now that you understand the importance of process goals, let’s get you started with some examples that you can utilize this week:

    • Sign up for a new class.
    • Complete one portion of your project by Thursday.
    • Start walking around the block instead of running a mile.
    • Improve your writing by spending 30 minutes everyday journaling.
    • Practice your interview skills.
    • Read at least one book from the library this week.
    • Do ten push-ups each day before you leave for work.

    You get the idea. These process goals don’t have to be complicated. If anything, you want to break down your plans to the point of them feeling easy or at least doable without needing a week’s vacation. By breaking your goals down into smaller pieces, you can accomplish a lot more in a shorter period. You’ll also feel more confident that you’re able to accomplish something within the moment.

    It isn’t easy to continue towards your goal if achievement feels too far away. You need to celebrate the small things and embrace the process.

    What Do You Need for Process Goals?

    Think about how much time and money you’ve spent on new clothes, books, technology, etc. Many of us want to keep up with the latest trends and purchase the best gadgets from Apple or Microsoft. But all of these extra investments come at a steep price.

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    To find your process goals, you may have to face some difficult emotions or situations bravely and confront them head-on. You might need to forgo the new outfit or the latest Mac book to meet your overall objectives.[1] Remember, process goals not only protect you from feeling overwhelmed, but they also keep you from being distracted.

    Final Thoughts

    You may feel overwhelmed at first when trying to set a process goal. Sometimes, just thinking about change triggers stress hormones, which only leads to more worries and anxious feelings. However, if you keep yourself focused and take small steps in the right direction, you’ll soon realize that goals don’t have to be complicated.

    You can achieve your process goals one day at a time, and you can start today by breaking down your larger goal into smaller steps. It doesn’t matter if the process takes a week or six months, what matters most is that you’re moving forward and doing something to make yourself better.

    Now, go on out there and achieve one of your process goals!

    Featured photo credit: Kaleidico via unsplash.com

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    Reference

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