Goal setting is all the buzz, so much so that you might wonder if goal setting is even worth all the hype. Goal setting is really important especially if you take time to consider why your specific goal is important to you and why you want to achieve that goal, and you are prepared to overcome challenges that undoubtedly will come your way as you make progress towards achieving your goal. When you set your goals, it isn’t good enough to just know where you want to end up to achieve the goal. You also have to have some idea about how you will get there because if you don’t, not only will your goal just feel too big, but it will also be easy for you to just not know where to start. Goal setting for your money helps you know what your budget is helping you achieve.
Common Money Goals:
Paying off debt
Saving for a vacation
Saving for a new car
Saving to make home updates
Saving for a new baby
Whether your money goal was listed above or if you have another one, you want to make sure that it’s clear in your mind. You want to be focused on why you want to achieve that goal and how you’ll feel when you get there. When you start your budget, you should leave money aside for your goals. If you use my free budget template, there’s a category called goal money that can help you work towards your target. What’s even better is once you achieve that goal, you get to set the next one.
Money Goal Example 1:
You want to pay off $12,000 in student loan debt.
You have $1,000 per month in your budget for goal money. Plus $200 per month for your student loan minimum payments.
To find out how long it will take you to achieve your goal, divide the total amount to pay by the amount per month you will pay. In this example, $12,000/$1,200= 10 so it will take you 10 months to pay off your student loan debt.
Money Goal Example 2:
You want to take a trip to Disney World and it will cost $2,000.
You want to go 5 months from now and are trying to figure out how much money you need to save per month.
To find out how much needs to be in your budget in the goal money category per month you need to take the total cost of the trip divided by the amount of months you will be saving. In this example, $2,000/5= $400 so you will need to save $400 per month to afford your vacation.
Money Goal Example 3:
You want to figure out when you need to start saving to have enough money set aside in cash for Christmas. You’ve gone through your list and are estimating that you will need $1,500 to buy gifts for everyone on your list.
You have $500 in your goal money category.
To find out how long it will take you to save for Christmas, divide the total amount needed by your monthly amount. In this example, $1,500/$500=3 so it will take you three months to save this money. If you want to have all your money saved by the end of November, you will need to start saving in September.
Money Goal Example 4:
You want to see if you can pay your car loan off more quickly than if you keep just making your regular monthly payments. You have $8,000 left on your loan. If you make your minimum payments, you’ll pay $350 per month for the next 26 months.
You have $650 in your goal money category.
To find out how quickly you can pay off your car loan, take the balance divided by the amount of goal money you’ll use each month from the car loan minimum and the goal money categories. In this example, $8,000/$1,000=8 months. In 8 months you could have no more car debt. As a bonus, if you keep with your minimum payment schedule, over the course of the loan’s remaining 26 months you will pay $9,100 versus if you pay it in advance you only pay $8,000. Paying your debt off quicker saved you $1,100.
When you set your goals, why are you setting this specific goal? Is it because you’ve always had this big dream and you think by saying it out loud it will magically happen without you doing the work? Is it because it’s a goal you’ve heard tons of other people make and you assume that it’s something you want too? If these are your reasons, dig deeper. The goals that you set should be very specific to you. You should feel some passion or compulsion to achieve the goals. You need to get really specific on why you want to achieve the goal.
Knowing your why will help you stay focused and motivated when you reach a roadblock or get distracted along the path to achieving your goal. It’s important to know that there will absolutely be challenges along the way as you work to achieve your goals. If you aren’t expecting any resistance or challenges it can be very deflating to hit a roadblock. Knowing that you will face challenges and having a plan for how to overcome them will allow you to persevere. When the path gets tough it’s also very helpful to remind yourself of why you set the goal to begin with. Why do you want to achieve that goal? How will you feel when you achieve the goal?
When you make your money goal, know that it’s the one thing that is currently the most important thing you want to achieve financially at that time. Your goals will change as your priorities change. By focusing on just one money goal at a time, you’ll be able to be laser focused on your goal and it will help you stay motivated with your money.
Other posts:
Overcoming Goal Challenges
Emergency fund importance
Don’t compete with the Joneses