With the new year almost upon us, many of us are thinking about the lifestyle goals we want to set. If you’re like most people, you also want to set some financial goals—both short- and long-term. The problem is, however, that many of us feel overwhelmed when it comes to sticking to our plans. Part of the problem is setting lofty goals that are nearly impossible to achieve, which quickly leads to burnout and feelings of frustration, or feeling like we don’t make enough money to achieve our goals, causing us to give up on them before we even get started.
Regardless of where you may be in your financial journey, the following tips will help you set manageable financial goals that can be achieved.
Long-Term vs. Short-Term Goals
Determining the difference between your short-term, mid-range, and long-term goals is one of the first things you need to do when setting your financial goals. Examples of short-term goals include saving for vacations, material items, and emergency funds. Meanwhile, making a large purchase (such as a home or car) and saving money to invest are considered mid-range goals. Long-term goals are generally classified as large purchases that will take time to obtain, such as fully funded retirement and college savings.
The key is to prioritize your goals in order and base them off of what is realistic for you right now. You may wish to have a large sum of money after you are no longer physically able to work, but money may be tight right now. In this case, it’s better to set a little money aside versus nothing at all.
It is also a good idea to approach your short-term goals one at a time while dedicating a smaller percentage of your income to long-term goals. The key is to write things down and gain some perspective on what you hope to achieve now and what can wait.
Crunch the Numbers
While being optimistic about the future is great, it is also important to be realistic, particularly when it comes to actual numbers. Setting a budget is the first step in reaching any financial goal, but this only works if you are going to put the effort into actually sticking to the budget. Assess your personal financial situation on paper and develop some tangible goals.
In addition to creating and sticking to a budget, your budget should ideally be reviewed every few months to see where you stand. Sometimes, people overlook this important step, but reviewing gives insight into where your money is going, where you can cut back, and how much you can dedicate to reaching your goals.
Stick to the Plan
As mentioned, the budget itself is usually not the problem—the real issue is sticking to it.
Creating a budget means actively tracking every expense as well as each source of income. Fortunately, there are several mobile finance apps that can help with budget tracking; some of them even connect directly to your bank account.
For those who prefer the old-school pen-and-paper method, try writing down every expense as it occurs. Though it may seem tedious, after some time, it will become second nature, and you will be able to think twice before spending frivolously.
Budgeting is great not only for reaching your goals but also for preventing a crisis. When you can turn to your budgeted savings in the case of an emergency, you are less likely to put these expenses on a credit card that comes with interest and long-term debt.
Aim High but Be Realistic
Sticking to a budget undoubtedly takes a lot of discipline, but it can be perfected over time with practice. Think of budgeting as an opportunity to learn more about your spending habits and identify the areas where you can improve.
If you are in a position to consult with a financial advisor, don’t wait until it is time to retire—consult one as soon as possible. You don’t have to work with a financial advisor to set realistic and achievable financial goals; finance websites can give you helpful tips that will accelerate your financial growth. As long as you are working toward your goals, setbacks will be relatively minor.