Most families tend to hit the floor running and don’t stop until bed, leaving very little time to figure out how to set financial goals for now and the future.
But if you don’t have some kind of idea of where you want to be with your money that you are working so hard for today, the time will fly by and you will kick yourself for not starting a plan or a direction sooner.
This doesn’t mean sitting down with piles of papers all at once and giving yourself a headache as you work out down to the penny what you can spend. This is way too restrictive and depressing. Setting some financial and personal goals should be done in “baby steps”
Step 1 – Take an hour or so on the weekend or evening or sometime when you are not totally tired out or distracted, and with a pad of paper write down a few dreams you have or ideas of where you would like to be next year? 5 years? Even next week? Close your eyes and really think about where you would like to be and what you would like to do with your life.
Just start writing things down as they come to mind and don’t worry about the money part yet, just start recording your personal goals and dreams, whether it is for something next week or next year it doesn’t matter, just start writing.
That is a good start. Now this list will give you some ideas of where your goals are. If you don’t have an idea of what you would like to accomplish personally then it can be hard to follow through with the finances. Having something to work towards makes it a little easier if you need to cut back on spending for example.
Step 2 – Take a look at that list of ideas, dreams and goals and start to separate them into two groups. One group will be “short term” meaning something you need to accomplish within the next 6 – 12 months for example. The other group is “long term” maybe some retirement ideas or a college fund for your kids for example.
Step 3 – Take a look at your short term column and take the smallest or easiest to accomplish idea and now start to play with numbers
You can break the above steps into baby steps to be done once a week. It is good to get into a habit of once a week to really sit down and look at this, without turning it into a whole day marathon which may just stress you out further. If this exercise inspires you then by all means continue, but if this is new to you it may take some thought.
Step 4 – Financial Budget – I know you probably cringe with that word, but you need to see where your money is going right now. You can break this into baby steps too; it all depends on how organized you are with your bills and bank accounts right now.
Make a list of all the bills that are paid each month. Then make a list of the bills that are paid annually or quarterly too.
Add up your bills that you pay monthly. Then take the others and add them up and divide by 12 to get a monthly amount and add it to the list.
Now you have that total of what you pay out every month. It may make you gasp, or you may be surprised?
Don’t forget to include groceries and spending cash in the list.
Step 5 – Now add up your take home pay. If you don’t have anything left over, or very little then you need to start cutting back on expenses. But in order to do that you need to set your goals up so that you have something to work towards.
For example: If you really want to take a vacation next summer and you know it will cost $1500.00 then you will need to put away $125.00 per month for one year to save that amount without simply stuffing it on your credit card. If lowering your credit card debt was one of your short term goals, then starting to save for it is a good start. Stop adding to the card and save up for it.
Step 6 – Look at the bills you pay out. There are some you can reduce and there are others that you can’t. Obviously the mortgage/rent and car payment will remain the same, but you can start working on the other variable ones, such as eating meals out, groceries, and cell phone bills, spending cash.
Step 7 – Don't cut all the good stuff out because life is right now, so you still need to have entertainment money, but you can pick and choose the entertainment. Get rid of the take-outs and have more for the weekend. Set an amount of cash for the week and stick with it.
Stop using your credit cards now. If you are using credit becaus
e you run out of cash then you need to adjust things in your life. You can start combining some bills to save money. Phones with cable and internet, or you can even do what we did and get rid of cable all together and get a small digital antenna and get the signals for free. We save 120 dollars a month with that setup. That will give us a nice vacation each year simply by sacrificing some mindless expensive TV.
Having goals will make some of the sacrifices easier to make. You can’t just say “to save money” it is best to say what you are saving for.
Step 8 – Long Term Goals. If you want to have the house paid off sooner, or you want to have a college fund for the kids, or you simply want to get rid of debt, then you need to open a “long term accomplishments” bank account and start putting a few dollars a month into it. Shave off even 1% of your take home pay and it will accumulate over the years.
Set Financial Goals for the Things You Want to Do in life. You may find you keep changing the list as life moves along, but keep that list going. You need to have hopes and dreams to work towards for this to work.