Creating Financial Goals
By: FinWise Bank
Growing up you may have had a jar full of extra change you found around the house with the intent of meeting a lofty goal – such as taking a family vacation. Years go by and your jar of change starts to look even scarcer than before and you have still yet to meet this goal. Why don’t we end up meeting our goals?
2020 was rough – but it’s time to get back on track! Let’s make 2021 the year of improving financial health and being on track to meet each of our financial goals.
Here are some tips to help you get started.
1.Create SMART goals
SMART is an acronym attributed to Peter Drucker’s Management by Objectives:
An example of using the SMART formula for a family Vacation:
Taking my family of 4 to Hawaii for a week.
I need approximately $15,000 to take my family to Hawaii* if I save a little over $1,200 each month I should be able to take my family to Hawaii next year. Perhaps, create a chart for your family to fill in as you save so you can visualize how much more is needed to reach your goal.
Maybe saving $1,200 each month is not realistic because I am also saving for a car. But if I save $600 each month I am much more likely to meet this milestone without getting discouraged and giving up.
Everyone in my family wants to go to Hawaii before our oldest child goes to college.
I can complete this goal in 2 years.
Try out the SMART formula with your own goal.
2. Account for Emergencies
A trip to Hawaii may not be such a priority if you run into emergency issues such as; medical expenses, losing a job, or a car repair.
If you don’t account for emergencies, goals that are still important but don’t serve an immediate need may never happen. Put a reasonable amount of money into your savings to keep you on track of meeting your financial goals. Businessinsider.com recommends keeping at least 3 months of basic living expenses in your emergency savings account.
When setting a goal – make sure you put aside enough money for emergencies first.
3. Continue setting healthy financial goals
If you come to the end of meeting your financial goal – don’t stop here! Creating good financial habits will continue to benefit you throughout your life. If you have been in the habit of saving an extra $600 a month (or whatever amount you have been able to save), allow this to continue to benefit your financial health. Pay off some student loans, buy a home and build equity, pay off a credit card, or seek higher education.
Start small if needed, but don’t ever stop working towards your financial goals and improving your financial wellbeing.
*Please note: this number is not an exact estimate of how much it would cost to take your family to Hawaii.