A financial goal is something you're willing to work for. That being said, how do you achieve it? The best way to reach your goal is by planning -and following that plan. Goal setting is the process you will follow to reach your goals.
When you examine your own goals, you'll discover that some are broad and far-reaching, while others are narrow in scope. Your goals can be separated into three categories of time:
Short-term goals take under one year to achieve. Examples may include taking a vacation, buying a new refrigerator or paying off a specific debt.
Mid-term goals can't be achieved right away but shouldn't take too many years to accomplish. Examples may include purchasing a car, finishing a degree or certification, or paying off your debts.
Long-term goals (over five years) may take several years to accomplish and, as a result, require longer commitments and often more money. Examples might include buying a home, saving for a child's college education, or a comfortable retirement.
The goal-setting process involves deciding what goals you intend to reach; estimating the amount of money needed and other resources required; and planning how long you expect to take to reach each of your goals.
Developing a financial goals chart is a good way to begin this process. Here are the five steps you should follow in order to set up your goal chart:
- Write down one personal financial goal. It should be specific, measurable, action-oriented, realistic and it should have a timeline.
- Decide if your goal is short-term, mid-term, or long-term, and create a timeline for that goal. This may change at any time based on your situation.
- Determine how much money you need to save to reach your goal and separate that amount by the month and/or year.
- Think of all ways you can reach that goal. Include saving, cutting expenses, earning extra money, or finding additional resources.
- Decide which is the best combination of ways to reach your goal and write them down.