From a beach house, a BMW, to traveling the world — there are many things in life that we want to accomplish. It’s our dreams that make life big. But, most of the time we stop ourselves from dreaming itself as we assume that these ideas are too far-fetched. However, most dreams can be achieved by turning them into goals.
Here is how you can set financial goals and then take a step-by-step approach to achieve them.
1. Identify your goals: Based on your standard of living and your family identify your financial commitments & goals and then categorize each as short (up to 1 year), mid (2–5 years), or long-term (above 5 years).
Here is a guide to set financial goals for different age groups:
- People in their 20s: Saving for a dream vacation, paying off student debt, buying a car or new gadgets, building a credit score, starting an emergency fund.
- People in their 30s: Paying off non-mortgage debt, saving for child’s education, boosting emergency fund, saving for house-down payment, starting a retirement fund.
- People in their 40s: Max out retirement contribution, pay off the mortgage, save for childrens’ wedding, Investing for future.
2. Attach a time frame to each goal: Time-frame should be set smartly so that it is not too short that you feel exhausted and is neither too long that it completely loses its purpose. Goals like retirement, children’s education have their set timeframes. For other financial commitments, saving to buy a house and car, it is up to you how you set the time for each goal — so be smart with that. Break your goals down into weekly/monthly/quarterly as it will be easier for you to achieve them.
3. How much to save: Once you have identified your goals and have a timeline for them, you can easily decide on how much you need to invest in order to reach the targeted future value. Initially, you may start with saving 10% income monthly and increase this contribution gradually based on your increment/promotion/income growth.
So you need to take into account the expected growth rate on your salary or business/professional income in calculating how much to save towards each and every financial goal.
4. Increase your income: The more income you have, the faster you can achieve your financial goals. So, brainstorm ways to boost it by increasing your income or decreasing your expenses, or both. Consider negotiating a raise with your boss, starting a side hustle, or decluttering your home to increase your income. To decrease your expenses, try temporarily cutting out subscription services, cooking at home more, or creating a debt-reduction plan to slash your interest expenses.
5. Find an accountability partner: The most important thing you can do to reach your dreams is to share them with others. Telling people you trust about what you genuinely want to achieve with your money reinforces your goals and creates accountability. Share your goals with a close family member, a friend, or with your spouse as they can help you to stay motivated and on track to achieve your goals.
Achieving your financial goals is all about getting one step closer to the life you daydream about, where you feel happy, secure, and on top of the world. Use the above guide to set financial goals the right way and achieve them sooner.