Tips for Planning Your Financial Life
Everyone has different financial goals. Some people wish to pay down their debt. Others want to build up an emergency fund or save for retirement. Whatever your financial goals may be, if you want to reach them, you’ll need to set firm goals and then come up with plans for how to achieve them.
The start of a new year is a good time to review your financial goals, chart your progress, and set new goals for the coming year.
Here are some tips for doing just that.
Review Your Goals
If you’ve set goals in the past, it’s a good idea to review them before you start setting new ones. After all, it’s only possible to accomplish so much at once.
When you’re looking at your existing goals, think about whether they are still important to you. Our financial lives are fluid and circumstances and priorities often change. For example, you may have set a goal of adding $100 each month to your emergency fund. This is a good goal to have, but it is one that can become complicated by various life factors. For example, if you lost your job during the last year, you may no longer have $100 each month to add to your fund. If this is the case, consider revising your goal. In the same sense, if you recently had a child, you may want to prioritize saving for your child’s education instead of increasing your emergency fund. As life changes, your goals should change too.
Once you’ve reviewed and revised your existing goals, it’s time to start setting new goals.
Setting New Goals
When you’re setting financial goals, think about what you would like to accomplish in a specific timeframe, such as in the next six months or the next year. How do you wish to see your financial situation change over these periods? If you wish that you had more money in your savings account or that you had less debt, then consider making these your goals.
It’s important to be specific when setting financial goals. Saying “I want to have more money” or “I want less debt” isn’t really useful because there’s no way to properly measure these goals and chart your progress. Instead, set goals like “I want to save an extra $50 each month” or “I want to be debt-free in one year.” Set a specific thing you would like to accomplish and a timeframe in which you would like to achieve this goal. Doing so will give you something specific to work towards while also allowing you to easily know if you’re reaching your goal.
If your goal is to save an extra $50 each month, for example, a simple look at your bank account at the end of the month lets you know if you’re succeeding, but if your goal is “to save more money” there’s really no way to know if you’re on track or not.
Setting realistic financial goals is also key. If you set goals that are too difficult to accomplish, you will fall short and lose motivation to continue. For example, if you make $40,000 a year, and you owe $40,000 in debt, it’s not realistic to set a goal of paying off all of your debt in one year. However, a longer timeframe or a less aggressive bill repayment schedule could be a reasonable goal.
Each person has different financial circumstances and, therefore, each person will have different financial goals.
Tracking Your Progress
Once you’ve set your goals, you’ll need to come up with a way to track your progress. Some goals are easy to keep track of, such as the goal of saving an extra $50 each month that was listed above. Others will involve writing down how much you spend, keeping track of how much you pay on your debt each month, or other ways of tracking.
If you find yourself falling behind on your goals as time progresses, stop and review your situation. You might need to make some lifestyle changes (such as adjusting your budget) to reach your goals, or you may need to revise your goals if you find that the ones you set were not realistic. Keeping track of your progress and making adjustments as necessary is critical for achieving your financial goals.