Advertising

How to Set Financial Goals and Actually Meet Them

Advertising
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

    Advertising

    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 7 Best Goal Planners To Get in 2022 2 15 Ways To Make Sure Your New Year’s Resolution Sticks 3 9 Tips For Making a New Year’s Resolution and Keeping It 4 13 Tips For Making New Year’s Resolutions Come True 5 Why New Year Resolutions Fail And How to Set Yourself up for Success

    Read Next

    Advertising
    Advertising

    Last Updated on January 14, 2022

    7 Best Goal Planners To Get in 2022

    Advertising
    7 Best Goal Planners To Get in 2022

    A few of the many obstacles to setting goals is that you either forget your goals entirely or you put them off for so long. One of the most effective tools in handling this problem is through having goal planners.

    Goal planners are a way to put your goals to paper and allow you to focus on that goal. These are great tools to be implementing new habits and boosting your overall productivity.

    With so many of these goal planners available, our editors picked out a small sample of some of the best goal planners that you can get to achieve what you want in 2022!

    Best Goal Planners Criteria

    Through our research, all the best goal planners that we picked out meet the following criteria:

    • Undated – A big issue with some planners is that they have days and years written in them. This is problematic especially when starting out goal setting. Undated versions allow you to start, stop, and take breaks without feeling like you’re wasting paper.
    • Science based – Either in their methods or in the activities these planners get you to do, these goal planners are smartly structured to help you get the most out of your day.
    • Simple, clean and organized – All of these planners are clean and organized to the point that these planners can serve as an extension of your brain. They’re able to easily organize jumbled thoughts and help you plot out your goals.

    1. Full Life Planner

    full-life-planner

      Lifehack’s Full Life Planner is a planner system built around the Full Life Framework. It’s a planner that helps you to organize every aspect of your life. The Framework has been going strong for 15 years and provides some of Lifehack’s best practices and proven success formulas.

      Advertising

      Get your Full Life Planner here, or try the digital version here.

      2. Panda Planner

        The Panda Planner has been highly reviewed as another one of the best goal planners to get. On top of it providing sections for monthly, weekly, and daily planning, it offers free videos as well as e-books to show you all kinds of strategies to help in all kinds of aspects of your life.

        You can get the Panda Planner here.

        3. Law of Attraction Planner

          This is the planner for people that want to manifest something new or exciting in their lives. It helps you to set goals through prompts, to-do lists, and goal-setting tools to establish habits. On the manifestation front, it provides sections for you to show gratitude, allowing you to be thankful for what you do have and are working towards. The planner also comes with a video to help establish a 10-minute morning routine and various stickers to make your planner more unique.

          Advertising

          Purchase the Law of Attraction Planner here.

          4. Little More Daily Organizer

            While it only has 328 undated pages, it offers a great focus on monthly and daily goal setting. It’s ideal if your goals and habits that you’re invested in and really want them to be sticking. How it’s able to do that is through its flexible design and also providing space for you to outline actions steps, reflect on processes, and prioritize multiple goals.

            Grab your Little More Daily Organizer here.

            5. Erin Condren Petite Planner

              Only 80 pages long, it’s efficient with its space as its packed with all kinds of features for setting goals and stick to your plans. You’re able to describe your goal, outline a “why”, and put together an action plan. The other page is a way for you to chunk large goals and put them into more manageable tasks. All around it’s a fantastic planner.

              Advertising

              Try the Erin Condren Petite Planner here.

              6. The 100-Day Goal Journal

                If setting goals for a year seems daunting, another one of the best goal planners that’s short is the 100-day goal journal. It has monthly spreads, daily reflection pages where you’re able to practice gratitude and check overarching goals. It even has space for you to reflect on current challenges and offer solutions to your problems.

                Take a look at the 100-Day Goal Journal here.

                7. SELF Journal

                best-self

                  The final of the best goal planners we have to offer is SELF journal. It offers daily gratitude acknowledgement, sections to track goals on a weekly basis and also has inspirational quotes to provide that extra push of motivation. It’s only got enough pages for 13 weeks, but it’s ideal if you set a lot of shorter-term goals and want those small habits to stick.

                  Advertising

                  Check out the SELF Journal here.

                  Final Thoughts

                  All of our goals are achievable with the proper mindset and a system to support it. Planners have been able to precisely assist those who struggle with getting started and need help in organizing their thoughts and putting it to paper.

                  For those who want to stick to habits, try out one of these planners to help you with that process.

                  Featured photo credit: Alexa Williams via unsplash.com

                  Read Next