When you’re taking control of your finances, one of the most helpful things to do is to create a goal — so long as it’s achievable. Otherwise, you might find yourself unsure of what steps to take or end up stuck in the middle of the process, treading water.
Before you even figure out how you’ll get to your goal or when, you’ll want to make sure you can form a concrete plan around it. A vague goal like “I want to be well off” lacks a firm end point, which makes it harder to determine what steps you’ll have to take to get there (“well off” is subjective, and you could find yourself constantly moving the finish line).
It’s important to be able to measure your progress as you work toward your goals. If you want to be better at putting money into your savings, ensure you can define what “better” means.
You’ll want to set goals you can reach (even if they might take hard work). For instance, let’s say your income is $40,000 a year, but your goal is to put $20,000 into your savings account. Not only will it be nearly impossible to achieve (unless you stop eating, that is), but you’ll also feel discouraged when your hard work doesn’t pay off.
We know what you’re thinking—how are attainable and realistic different? When considering your own goals, think of realistic as what’s realistic for you.
It’s great to have long-term goals: you want to buy a house one day, you want to move to a more expensive area a few years down the line, you want to help your kids pay for college. But depending on when these events will actually happen, it may be difficult to set up a timeline for meeting them — and that’s not even taking into account the unpredictability of the future.
Some financial goals can seem so big or so far off that it’s hard to get a handle on them. But if you create your goals using the S.M.A.R.T. system — and put in the work — you can keep even the most monumental mission under control.