How to set financial goals you'll actually achieve
Setting financial goals is the first step toward financial freedom. Here are some tips to help you set and achieve worthwhile goals.
This post comes from Rob Berger at partner site The Dough Roller.
Setting goals is an important part of the process of improving our finances. It's so easy to get bogged down in the day-to-day pressures of life. Goals help us think beyond the daily details of life and focus on the big picture.
Consider the past: Considering your history with setting and achieving (or not) financial goals can help you set more effective goals now. By understanding past successes and failures, you can better prepare yourself to achieve financial goals in 2014.
Find your motivation: We all find motivation in different ways. What motivates me may not motivate you. One key to successful financial planning is understand what motivates you. By tapping into what drives you, you'll set goals tailored specifically to you and increase the likelihood of success.
Be realistically unrealistic: Goals need to push us, but not overwhelm us. Set goals that are too easy and you’ll likely never reach your potential. Set goals that are too aggressive and you’ll likely get discouraged. For me, the sweet spot can be found with goals that I describe as "realistically unrealistic." Some call it stretch goals.
Make your goals specific and actionable: Goals need to be specific. A good way to tell if your goals have met this test is to ask how you'll know when you've accomplished your goal. If you can't answer that question, it's time to rethink your goals. In addition, goals should be followed up with an action plan. A good start is to ask what your first step will be to achieve the goal.
1) what I should accomplish if everything goes right.
2) what I should accomplish if things go as expected.
3) what I should still be able to accomplish if bad luck prevails.
I begin shooting for goal #1, but the beauty of the system is that if problems (unexpected expenses, a bear market, etc.) arise that make goal #1 impossible, I have something to fall back on instead of getting discouraged where a lack of motivation can derail the whole exercise. The same applies to goal #2.
However, regardless of what hand you have been dealt, of your doing or others, addressing income is your best way to achieve financial goals. It's hard to get ahead if you aren't making a decent wage. So increase your skills set to maximize your income. The more you make, the better you will be able to save for retirement and avoid debt issues. So it's not only what you save, but how much you make. Don't let folks fool you into thinking otherwise.
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