Setting Yourself Up for Financial Success with Goal Setting
Can you believe the holidays are almost here? Have you finished shopping for gifts yet? The holidays are a time to show family and friends how much you care about them. This is often done through gift giving. While there’s nothing wrong with buying loved ones nice gifts, the last thing you want is for your gift giving to derail your short-term and long-term financial goals and start the new year in debt. How do you avoid overspending during the holidays? By setting financial goals and sticking to them no matter what.
Financial goal setting is the foundation of financial success. Goal setting is very personal. What may be a good financial goal for me, may not be an appropriate goal for you. For example, if I have student debt, I may set the goal of paying off $10,000 in student debt this year. However, if you’re debt-free, you may set the goal of saving toward a vacation. It’s all about setting a financial goal that’s appropriate for you and being committed to seeing it through.
Budgeting and Tracking Your Spending
At the foundation of goal setting is budgeting and tracking your spending. A budget breaks down your spending into specific categories, such as mortgage/rent, gas, groceries, clothing, transportation, and the list goes on. A budget can be an eye-opening experience. A seemingly small expense, such as spending $5 here and there are the convenience store, can easily add up to $100 per month.
Setting a budget is a good first step, but it alone won’t set you up for financial success. It’s equally important to track your spending. Tracking your spending is made easier these days thanks to budgeting apps like Mint. Some credit cards even categorize your spending, so you don’t have to, making it easy-peasy. By tracking your spending, you can make sure you’re not exceeding your budget and have money left over at the end of the month to save.
Setting SMART Goals
While setting goals is helpful, setting SMART goals is a lot more powerful. In case you haven’t heard of SMART goal setting, it’s an acronym short for Specific, Measurable, Actionable, Realistic, and Time-bound. For example, instead of saying you’d like to save up for a home, a SMART goal would be to save a $40,000 down payment in two years.
The “R” in SMART stands for “realistic.” You want to make sure you’re able to achieve your goals. How do you do that? By working backwards from the personal goals you set. Figure out exactly how much you need to save from each paycheque in order to meet your goals and “pay yourself first.” Make savings a priority by automatically depositing a set amount each month, say $200, from your paycheque in a high-interest savings account. The money will be safe and sound in your savings account before you’re tempted to spend it.
5 Questions to Ask Yourself About Goal Setting
Confused about goal setting? Don’t be. Here are some questions you can ask yourself to get started. Answer these questions to get a better idea about how realistic your goals are and adjust as needed.
1. When do you want to reach your financial goals?
2. How much in total will you need to save to reach your goals?
3. How much can you save from each paycheque toward your goals?
4. What sacrifices will you need to make in order to achieve your goals?
5. How will you benefit from goal setting in the future?
By setting goals, you’ll set yourself on solid financial footing and more likely to succeed in 2017 and beyond.