How to Set Financial Goals

This is What They Didn't Teach Us in High School

How to set financial goals wasn't a course in my high school. There weren’t courses on making money or investing money either. I find it ironic that the practicality of teaching algebra is an age-old debate, but skills that obviously apply to the real world aren’t even touched on in conventional high schools. What I hope to create is a short overview of what a lesson on how to set financial goals would have looked like if it was to me back in high school. Starting with…

Financial Goals Should Be Realistic

In a perfect world the information I give you here would be able to help you to meet all the goals you want to meet. Whether it’s creating a nest egg for retirement or just having that emergency fund you always talk about starting. This isn’t a perfect world. That’s why setting goals is important, because most of us can’t meet all the possible goals there are to reach. If you could meet all your financial goals and go to sleep tonight with a retirement fund, college savings for the kids, no outstanding loans, and an emergency fund… Then you wouldn’t have found this article.

Pick a Single Financial Goal

Step 1

It sounds simple and you’ve heard it before, but scientific research has shown time and again that we as people fail miserably at pursuing more than one major goal at a time. If you don’t believe me, go ahead and Google it. It’s worth a Google. So seriously, for now pick just one financial goal. For me it is paying off student loans. These add interest over time and actually subtract from my income every month I don’t give them priority. Chances are you have an expense that does the same so that could be a good place to start.

You Have a Reason For That Financial Goal

Step 2

The reason for a goal is important. The reason I’m researching this subject, as well as the reason I’m writing this article is I have an intense fear of poverty. My parents pulled us up from homeless to middle class by the time I was in 2nd grade. So I will do anything to avoid ending up back in that place. Knowing this reason gives me the drive to come to my computer and type when I’ve just got off an 8 hour shift and would rather go to bed. Also, when I’m feeling a lack of motivation I just have to look up a statistic or an article about poverty and I’m back at it, fully fueled again. Your reason might not be as dramatic, but I swear if you think about your kids working a menial job and never finding happiness then saving for their college doesn’t seem like such a difficult task. P.S. This is the most important step on this list!

Get Your Finances in Specific Terms

Step 3

When I say specific, I mean really specific in every area of your financial life. For one entire pay period (for me 2 weeks) write down every expense. This step isn’t self-help bull crap. If you don’t know what you’re spending then you can’t know where you can scale back. You have to see your mistakes to fix them. So get a notepad and pen and start keeping track of every penny. After you finish with that join me at step three.

Make Your Financial Goal Specific

Step 4

The OCD isn’t over yet. Now that you’ve got a solid idea of what money coming into your house looks like and where it’s leaving through you’re going to use that information to craft your goals into a more concrete form. These goals will be so specific your head will start to hurt by the end of this, but a good kind of hurt, you know. Rather than setting a goal to pay down on the credit card each week you’re going to set the goal to pay $20 on card A each Monday, $25 on card B each Monday, and Pay $50 dollars on card C each Monday. Card C has the highest interest rate by the way, that’s why you’re getting that debt paid off fast. Specific numbers and dates are important in planning. So get as specific as you can.

Finding the Money for Your Financial Goals

Step 5

I told you that little log of what you’re spending where was important. Because odds are there is some extra money somewhere. Maybe you do buy coffee every day. Maybe you fell for that buy one get one candy bar deal. Maybe your deadbeat brother has borrowed more money than you originally realized. Whatever the case is you’re bound to have more money than you realize leaving your pockets, and it’s that money that will help you reach your goals and get you more money in the future. Step 2 also comes in here, because now when you see that candy bar or that deadbeat brother (whichever) you can remind yourself of your reason. That crippling poverty, that future your child may have flipping burgers and you can use it to make the right financial decisions. Also, if you’re doing everything right. There are ways to make extra cash. From selling books on amazon, to “donating” plasma, if you’re serious about this finance thing you can find a way to cut back and make more.

Financial Planning is an Ongoing Process

Step 6

Change it up. Chances are you still like the same pizza you always have (I will always love pineapples and ham). But other things about you do change. These include your financial goals. You don’t shave once and call it done. You don’t clean your house once a year and feel like that’s all you need. So this personal financial planning, this part, and parts I plan to write in the future all need re-upped at least once a week. Keep track of how you’re doing. Keep that little notebook and magenta crayon around and track yourself. Remind yourself of what drives you. Give the economy a Google. So re-up and make changes constantly. No one will ever value your financial well-being as much as you do, so take it seriously and pay regular attention to it.

More to Come...

For my next article, Part 2 on how to manage cash, I plan on delving into what makes a good budget. Also, what to consider in choosing a checking account and savings account. As well as any other questions I can think of or you can suggest about cash money.