by If you have set goals for grades in school, times for races, or savings for vacations in the past this post will help you take that mindset and apply it to larger financial goals.
If you have never set a financial goal before, have no idea why you should do so, or if you should, this post is for you. We invite you to go through this financial goal setting with us. This is how we approach our financial goal setting and it’s one you can easily adapt to any goal you desire.
What is The Goal For This Money?
If you haven’t started setting goals for your money before that’s ok. We would like to encourage you to start setting some goals. So today is the day to take on goal setting.
Goal Setting Step 1: what is the goal that you are working towards?
We like to start with the end in mind. Are you looking to save for a downpayment on a house? Are you looking to save money for a new car? Is this money to be used for retirement or a once in a lifetime vacation?
Some possible goals listed out that we would invite you to select from:
- House down payment
- Car down payment or outright purchase of a car
- Saving for retirement
- Saving for a child’s college or a loved ones college or someone you really like that you want to help them go to college
We have created a quick goal worksheet that you can download, make a copy, or print for your use in financial goal setting.
Goal Step 2: what priority does this goal take in your financial world?
Step 1 is easy as it is kind of like dreaming. We want you to do more than just dream. We want you to start putting action to your dreams. Step 2 is all about deciding where the priority for this goal should be in your financial budget.
In this step you have to answer a few questions about how important this goal is:
- Is it more important than my digital subscriptions?
- Is it more important than the number of times I eat out weekly?
- Do I want this more than I want a latte and a scone from Starbucks?
- Is this more important than the new iPhone?
Notice in this step we aren’t saying any of the other financial choices you are making are bad or are good. We are asking where the importance of this goal lies.
James has often said it doesn’t feel like sacrifice when you want something more. This mentality makes it easier to stick with your financial goals as you are no longer “giving something up”, rather you are working toward your best possible financial future.
When you want that down payment for the new house more than you want a latte it will be easy to accomplish.
To get started on priority we want you to select a number between 1 and 10. These are your top 10 financial items. A 1 would mean that this goal is more important than the place you live right now and you are willing to move to save money for this goal. A 10 would mean it would come after items such as cell phones, eating out, and vacations. In other words it would be a nice to have vs a has to have.
For most goals we would recommend somewhere between 2-6 to keep you focused on achieving them.
Goal Setting Step 3: how much do you need for that goal?
Now that you have your goal written down and it’s priority it’s time to do a little math and determine how much money you need to reach this goal.
Throughout this entire process we encourage you not to judge yourself or your goal. Even if the number that comes out of this step is a large number or bigger than anything you have ever accomplished before that’s 100% ok. This is part of the process of growing.
For illustration purposes today we are going to use the goal of saving for a car. For our example we are going to make the assumption that you have a car that is paid off, you believe you have some good years, and for your next car you would like to make sure you put down a large down payment for a smaller monthly payment.
