All You Need To Know About Setting Realistic Financial Goals
Did you achieve your New Year’s resolution this year? If yes, congratulations. If no, the chances are high that you had set an unrealistic goal. A lot of us set ourselves for failure by coming up with unrealistic goals. For instance, if you want to lose some weight a goal of losing a pound or two per week is a realistic goal. But most of us just set the end weight with no time frame.
Losing weight and setting financial goals are poles apart, yet the central theme remains the same. Setting realistic goals is the first step towards achieving them. Here are a few simple steps which will help you set financial goals that are realistic and achievable.
- Drop Any Comparison
With the presence of social media almost in every sphere of life, it can get a bit difficult to stay away from what your friends or relatives are up to. However, paying too much attention and comparing them to you is a bad place to start your proceedings. You should not compare even with people of your same age group. You can start with what you have in your hands and work your way up,instead of procrastinating of when things get better. As mentioned with the weight loss example, you cannot become wealthy overnight, unless you get your hands on the jackpot.
- Realistic Goals to Save
You can follow simple goals to start saving and making an impact. You goal must be simple, timely, measurable and relevant. You can set up a goal to save a certain amount by a specific day every month to increase your chances of succeeding. You can break down bigger goals and start working towards them. For example, if you want $10,000 for the down payment of your car in a two to three years, you can start by saving $250 a month. Even before you realize you would have accumulated more than half of your down payment requirement. Of course, you can play around with the $250 a month value. Once you know the amount that you must save, you can plan your expenses accordingly and achieve the goal.
- The Right Goals
It is essential to set the right goal and priority for these goals as well. While it is essential that you save towards a car, you must not forget that an emergency will not wait for you to be financial stable. Thus, you must make small contributions towards ensuring that you have savings to last you at least a month’s worth spending. The more you end up with, the better it is. This short term goal will give you the confidence that you can achieve bigger goals with equal confidence.
Similarly, you can set other smaller goals to pay of any pending debt. Getting rid of your debt will help you eventually save more and work towards other goals.
- A Working Budget
When it comes to financial goals, it is crucial that you set up a working budget. An effective budget will ensure that you do not end up spending every penny that you earn. You need to find a good balance between the inflow of funds (income) and expenses. If you find it a bit challenging to create a budget, you can take the help of any of the several apps or tools in the market. However, merely creating a budget is just the beginning. You would need to stick to the budget diligently month after month to achieve your financials goals and eventually achieving financial freedom.
Financial planning is important and so is setting targets. The targets set should be realistic and achievable, else they are of no use. Proper thought and analysis should go into setting realistic targets.