Setting financial goals feels like the most grown-up thing to do. It’s not only a clear sign that you have started taking your personal finances seriously, it is also the first step towards financial stability through maintaining good finance habits. But how many of us eagerly list down 2-3 ambitious financial goals every year, either only to live your life poorly and meagerly by greatly cutting down expenses (which isn’t worth it!) or simply make no headway into achieving these financial goals whatsoever as the year goes on.
While setting financial goals is often the easy part, practicing discipline and actually achieving these financial goals proves to be the hard part. While you might be able to stick it out for the first few weeks or months, as the time drags on, it becomes increasingly difficult to keep your eye on your financial goals especially when you face one temptation after another.
Let us take you through proper financial goal setting and, more important, some tips to help you meet your financial goals.
Tips to help you meet your financial goals
Think about why you set those goals in the first place
There are many reasons why people start financial goal setting. It may be to save up enough for an upcoming large purchase or expense (e.g. wedding expenses, personal loan expenses vehicle or home purchase) or even a sudden realisation that you have been spending too much and that it’s high time to start saving. Regardless of what the reason behind your financial goal setting might have been, by keeping this reason alive in your mind, your initial motivation behind it can keep you going.
Know where your money goes
Any sort of financial advice will neve be complete without emphasis on tracking your expenses. Knowing how and where your money gets spent will not only open your eyes to just how much money you are spending unnecessarily but it will help you prioritise areas of your life by putting certain things into perspective. For example, if you realise that you are spending more money on shopping each month rather than on household expenses, that might help you cut down on over-shopping. Tracking your expenses regularly will also help keep your finances at the top of your mind at all times thereby acting as the voice of reason behind any actions involving money.
Stagger your purchases
Goals or no goals, there are expenses that cannot be avoided - purchases that are simply necessary and which don’t come cheap. Rather than buying all of these at one time, prioritise each expense and stagger them over a few months. Allow yourself one major purchase/expense each month (or even each quarter) and make sure your financial goals take that into account. Doing this allows you to develop your expense planning habits and might even make you realise that you could simply do without certain things you had badly wanted.
While this is easier said than done, by including some room for investing into your financial goals you can get started on a road that has the potential to make you a millionaire. Invest a few thousand rupees to get you started (invest an amount that you are comfortable with losing at first) and as you learn the ins and outs of investing, you can supplement your income and get more freedom for your expenses. Investing really is the best way to grow your finances.
Break down long-term goals into short-term goals
If you have set annual goals for yourself, try and break these down into monthly or quarterly goals. This will act as a yardstick against which you can measure your progress as times goes on, and help you get back on track in case you aren’t progressing as well as you need to. For example, knowing you have to save Rs. 10,000 each month is easier to digest than setting a goal of Rs. 120,000 in savings for the year and having more than half left to go by the time you enter the last quarter of the year.
Finally, treat yourself! There’s nothing like some positive reinforcement to motivate you to achieve something. Allow yourself one semi-extravagant purchase every time you meet a short-term goal. For example, when you hit the Rs. 50,000 mark of your annual savings goal, allow yourself to buy a new outfit or a new game. Of course, this treat shouldn’t be large enough to negate the goal you achieved!
Why do I need to set Financial Goals?
Financial goals are a must nowadays, as they allow you to work towards something without blindly trying to cut down on expenses or save money as and when you can. It also makes planning the way forward and tracking progress much easier, as you have milestones to compare your journey to. In addition to this, financial goal setting helps in:
- Providing a focus around which you can centre your income and expenses
- Measure progress - How much have you achieved? How much is left to achieve?
- Reducing risk of non-achievement by clearly denoting how much you need to be earning and spending
- Planning your income and expenses in different areas
If the above steps haven’t worked for you, maybe it’s time to re-look at your financial goals; setting financial goals that are actually achievable is a difficult task in itself. The following video provides some useful tips for SMART finance goal setting in 2021, especially for younger people, without having to sacrifice the most fun parts of their lifestyles. (Read here: How to make a budget by paycheck)