Personally, I believe that everyone should set annual financial goals AND write them down. When you write down a goal, it helps you grasp the meaning of that goal and helps motivate you to obtain it. No more, “Man, we need to pay off this credit card debt,” or “I wish that we cold afford to go on a vacation.” Instead, set realistic goals such as, “I will pay off this credit card by January 2017,” or “I will save $500 for a weekend vacation this year.” So many people talk themselves out of financial freedom before truly running the numbers. They immediately assume that is something they can never afford. The thing is, they can with determination, open mindset and time. Sure, it may take longer for others but that is better than not trying and never reaching it.
Earlier this year, my husband and I set four financial goals that we wanted to complete by the end of 2016. They are:
- Pay off all credit card debt: $3,700
- Pay off a small personal loan: $1,950
- Build a $5,000 emergency fund: $3,000 (we already had $2,000 in savings)
- Save for a vacation: $1000
Grand Total: $9,650
That equals to approximately $805/month going towards our financial goals. That is a huge chunk of change that we have to come up with to meet these goals. We were already putting $100 into our savings and paying around $200 in minimum payments for the rest. So we still needed to find $500 in our budget to make up for the rest.
How We Do It
The most helpful tool for managing our finances has been YouNeedABudget (YNAB). It is a premium budgeting software that completely changes the way you think about your money. It is not just a fancy spreadsheet, it is lifestyle that helps maximize your financial future.
YNAB helped see categories that we could cut down in, such as, changing our cable and internet service, bundling our home and car insurance, spending a little bit more on groceries so we could drastically cut down eating out (hey, we are big foodies) and overall watching our spending habits. This helped us find some of the extra money we needed to get started on our financial goals. The other money comes from selling things around the house that we no longer use and my husband’s lump sum coaching supplements (he is a high school football and baseball coach).
How We Are Doing
I am actually very surprised how well we have done after putting our minds to our goals. I was afraid that I was stretching ourselves too thin with too many goals. However, just by paying close attention to our money, we will reach each of our goals earlier than predicted. As of May, this is the status of our goals:
- Credit Card Debt Amount: $1,900
- Small Personal Loan Amount: $270
- Emergency Fund: $4,400
- Vacation Fund: $800
Grand Total Left: $2970
Based off of our budget, we should reach our goals by October. Heck, yeah! Now, I have to decide if I want to slow down for two months or keep the momentum going by starting on 2017 goals. We will see. 🙂
What You Can Do
- Sit down and look at your finances. Pull out bank and credit card statements. Look at all your debt and account balances. Grasp the full picture of your financial health.
- Set 1-5 financial goals. How much money do you have in your savings? Need a new vehicle or want to go on a vacation this year? Or maybe you need to look more long term, such as saving for retirement or your child’s college education. Whatever it is, WRITE. IT. DOWN. Not only should you write it down, but give each goal a deadline. For example, “I will pay off ABC loan by January 2017.”
- Communicate your goals with your family. This is the most important aspect of setting financial goals. Talk to your spouse or significant other and your kids. Communicate what your goals are and how you plan to reach them. Are you going to eat out less or lower your cable plan (or cut cable all together)? Make sure that everyone is on the same page. Keeping your children in the loop will teach them the importance of maintaining your finances to reach financial freedom. So many people think finances should only be for the grown ups. If your child is old enough to understand how to save for a new toy, then they should know how setting financial goals will help the family’s future.
- Monitor your monthly progress. This is a big one. As you monitor your progress, you are much more likely to stay on track to meet your goals. We thought it would be almost impossible to meet all of our goals this year but we will most likely reach them a couple of months early. This all because we track our progress and budget our monthly expenses through YouNeedABudget (YNAB).
- Reevaluate every 3 months. Not only should you track your monthly progress, but I highly recommend reevaluating your goals every three months and make sure that it is still a manageable and obtainable goal. Do you need to cut some expenses to stay on track? Do you need to sell unused items in your house to give you a boost? Maybe you are doing so well that you add on another financial goal. Either way, checking the overall picture every three months will help guarantee your success.
Now, I challenge you to look through your finances and set at least one financial goal. Or let me know what your current financial goals are. I love being inspired!