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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.

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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

    Reference

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    Ankit Garg

    Serial entrepreneur and working towards Early Retirement

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    Last Updated on January 25, 2021

    13 Visualization Techniques to Help You Reach Your Goals

    13 Visualization Techniques to Help You Reach Your Goals

    Broadly speaking, visualization is all about generating a mental picture that helps you achieve your goals. In some cases, it serves as motivation. In others, it allows you to relieve your anxiety and increase your focus.

    In any case, the right visualization techniques can help you succeed—no matter what you’re aspiring to achieve.

    What Are Visualization Techniques For?

    Let’s take a look at some of the common ways visualization techniques are applied:

    • Motivation – Most of us have experienced difficulty in finding motivation. Visualization can remind you what you’re trying to accomplish, and inspire you to keep working hard to achieve your goals.
    • Confidence – Picturing yourself in a successful or powerful position can conjure feelings of confidence that you’ll be able to achieve this. It’s a neat mental trick that yields a powerful effect.
    • Rehearsal – In some applications, visualization can be used to rehearse a scenario before it unfolds in real life, essentially giving you a “practice run.”
    • Anxiety Reduction – Visualization is also beneficial for stress management if you can use it to assuage your intrusive thoughts or clear your mind of distractions.

    13 Best Visualization Techniques (And How to Use Them)

    Now let’s dig into the most powerful visualization techniques—and how you can use them to get better results in your personal and professional life.

    1. Visualize Yourself Succeeding at Your Goal

    This is the easiest visualization technique and the one that most people start with. Simply visualize yourself succeeding at your goal.

    You might picture yourself crossing the finish line of a marathon race or see yourself shaking the hand of the CEO after a major promotion. As long as you have some kind of visual in your head, you’ll be able to derive motivation and confidence from the experience.

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    2. Establish Triggered Visuals

    Our minds are notoriously good at connecting experiences together; it’s why even a faint whiff of a scent can trigger a powerful memory and a flood of emotions. You can set yourself up for success by creating your own triggers.

    For example, you can spend time exposing yourself to some kind of sensory input, like listening to a song you love while visualizing something positive. Then, when you need to perform, you can replicate that sensory input and capitalize on the visualization.

    For example, you might train for a powerlifting competition with a specific playlist, and play that playlist during the competition to call up the visuals you rehearsed.

    3. Create a Vision Board

    Our first two examples involve the classic form of visualization: internally visualizing a scenario. However, some people suffer from a condition known as aphantasia, rendering them unable to conjure mental imagery.[1]

    If this describes you or if you simply prefer something more tangible, consider creating a vision board. A vision board is typically a collection of photographs and images that remind you of your goals and narrow your focus.

    For example, if you’re trying to lose weight, you might create a vision board of images of your goal body. Put it somewhere so that you can see it regularly. This works similarly to an analytics dashboard commonly used in business. That which is measured and monitored is improved!

    4. Write Yourself a Check

    Another effective visualization technique in a physical environment is to write yourself a check (if your goals are monetary in nature). For example, if you want to become a millionaire by age 40, you can write a check to yourself for $1 million and have it framed.

    This is a strategy famously used by comedian Jim Carrey, who wrote himself a $10 million check dated 10 years in the future.[2]

    5. Use a Notecard to Make Your Goals Physical

    If your goals aren’t monetary in nature but you’re still looking for a way to make your images more grounded in the real world, consider writing your aspirations down on a notecard.

    The best way to frame these messages is with intention and confidence. Instead of writing “My goal is to improve my relationships with my family,” write, “I will improve my relationships with my family.”

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    Again, put these notecards where they’ll be seen regularly to consistently remind you of their existence.

    6. Create a “Happy Place”

    This visualization technique is best applied as a way to mitigate stress and anxiety. If you frequently find yourself overwhelmed or unable to perform when trying to accomplish something, consider coming up with a “happy place” you can visit and use as a method to destress.

    For some people, a happy place is being isolated on a boat in the middle of an open pool of water. For others, it’s in the middle of a mosh pit at a punk rock concert. It doesn’t matter what your happy place is, so long as thinking about it soothes your negative feelings and eases your racing thoughts.

    7. Convert Your Desires Into Beliefs

    Most people frame their visualizations as things they want to happen, rather than as things they believe will happen. If you want to be successful, it’s important to make the change. Converting your desires into beliefs is an important and effective visualization technique.

    If you’re already visualizing hypothetical scenarios, all you need to do is shift the way you consider them. Instead of imagining them as a form of wishful thinking, convince yourself that this is a form of predicting the future.

    This is what is going to happen if you stay committed to your goals.

    8. Rehearse Potential Situations

    In many fields, it’s beneficial to use visualization as a way to rehearse potential situations you may face—especially if those situations are stressful or unpredictable.

    For example, let’s say you’re planning to initiate a difficult conversation with your boss about a topic that’s been bothering you for months. Visualization can help you imagine your boss’s response to everything you might say and plot out different branches that the dialogue could follow.

    If done right, this can help reduce your stress, making the worst-case scenarios seem more manageable, while simultaneously equipping you with better skills for navigating the situation as it unfolds.

    Just be careful not to rehearse so much that you become unprepared to deal with developments you didn’t see coming.

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    9. Visualize Multiple Potential Options

    Most of the time, the best way to utilize visualization is to picture a single option; you win the race, you lose the weight, you get the promotion, etc. But it may also be helpful to visualize multiple potential options.

    What are all the ways this could pan out? What are the best-case and worst-case scenarios?

    Again, this is a way to moderate your fears. Just don’t spend too long visualizing negative outcomes, or they may come to dominate the narrative. Always shift back to a more positive mindset.

    10. Put Yourself in Someone Else’s Shoes

    Chances are, there’s someone you look up to or someone who has achieved your desired goals in the past. Consider using visualization to put yourself in their shoes. This visualization technique allows you to establish a connection with their strongest (or weakest) moments.

    For example, what was Steve Jobs thinking when he was originally ousted from Apple, and how was he able to recover? What was Muhammad Ali thinking when he beat Sonny Liston?

    Choose a role model you find interesting, and study their path to success or victory—just don’t let survivorship bias cloud your judgment too much.

    11. Flesh Out Your Visualizations With Sensory Experiences

    At this point, you have the strategies and direction necessary to engage in positive visuals that motivate, inspire, and empower you. Now, let’s focus on a couple of strategies that can help you improve the quality of those visuals.

    One key way to make your visualizations seem more “real” and allow them to affect you more strongly is to flood them with detailed sensory experiences.

    What is the temperature in your visualization? Who is around you, and what are they wearing? Is there music playing in the background, or can you hear the ambient noise? What are you smelling?

    The richer your visualizations are, the more powerful they can become.

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    12. Add Positive Energy Into Every Instance of Visualization

    Positive thinking is shown to have massive psychological benefits, such as reducing your stress and improving your mood.[3]

    Accordingly, you should be framing your visualizations with positive thoughts. If you feel a negative thought intrude your mind in response to your visualization, combat it with a corresponding positive.

    For example, you might think to yourself, “who am I kidding? I’ll never be able to accomplish that.” Meet that negative thought with a positive twist: “I may not have been able to accomplish that in the past, but I can now” or “I may hit some major obstacles along the way, but I will accomplish this.”

    13. Picture a Happy Memory From Your Past

    Most visualization techniques are all about the future, setting you up for success or helping you play out hypothetical scenarios. But it’s also occasionally useful to visualize the past.

    Think of a happy memory or a place you used to love; visualize yourself surrounded by people who have loved and supported you, and imagine how you felt in those moments.

    It may be just what you need to get through a tough situation.

    Bottom Line

    Through visualization, you’ll be able to boost your confidence, motivate yourself, and decrease the stress and anxiety you feel as you face new challenges head-on. The more you practice it, the easier it’s going to get.

    More Tips on How to Reach Your Goals

    Featured photo credit: Simon Migaj via unsplash.com

    Reference

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