Setting Financial Goals: Stop Wishing. Start Planning
Jan 29, 2021 | 4 min. read
The key to setting financial goals is to create intentional, actionable targets.
The idea that goal setting is motivational and spurs productive, positive action is not a new one. In fact, American psychologist Edwin Locke first introduced Goal Theory in 1968. His report concluded that workers are consistently more motivated in their jobs when they are striving to reach specific goals.
Goal setting doesn’t just improve job performance, though. It can be a catalyst for improvement in all aspects of your life, including relationships, health and lifestyle goals. And it is vital for success in managing finances, too.
To establish a solid financial foundation, most people understand they need to spend less and save more. But without clear objectives, it’s challenging to know how much to set aside for how long. In addition, staying motivated and holding yourself accountable is practically impossible if you don’t know exactly what end result you’re trying to achieve. This is why setting financial goals is so critical.
But how do you set goals that will stick? Those with weight loss or fitness goals might put an aspirational photo on the fridge as a visual reminder. Over the years, vision boards — collages of images illustrating your ideal life — have also become popular. Digital versions can be built on Pinterest, and Instagram has over 80 million posts using the hashtag #goals.
There’s nothing wrong with these motivational tactics as long as you understand the vision is just the beginning. The next step is to break it down into clear-cut goals that reflect what is important to you and encourage productive behaviors. After all, goals without action are just dreams.
How to Realistically Achieve Financial Goals Using the SMART Method
Before getting started setting financial goals, consider the popular goal-setting acronym SMART, which stands for specific, measurable, achievable, relevant and time-bound. Here are some reasons why applying the SMART tool can help create more actionable goals:
- The more specific, the better. A goal of retiring at age 60 in a two-bedroom condo on the Florida Panhandle with a part-time job is more tangible than simply saving for retirement.
- “Build an emergency fund equal to three times my monthly income by year-end 2022” is far more measurable than “Save money for an emergency fund.”
- Don’t set yourself up for failure. Make sure your goals are challenging but achievable so you don’t get discouraged and give up altogether.
- Before setting an objective in stone, make sure it is meaningful and relevant to you and your lifestyle. For example, pursuing homeownership would be premature before you’ve paid off excessive debt and accumulated emergency savings.
- Keep yourself on track with deadlines and progress checks. Time-bound goals help you stay focused and accountable.
It’s also helpful to separate short-term financial goals (such as paying off debt and saving for a specific home repair) from long-term goals (like buying a home, planning for retirement or building a college fund for your kids).
Last, work with a professional. Career military families who have a financial advisor reported an average of $242,602 in savings and retirement holdings, according to the First Command Financial Behaviors Index® Q1 2020. That compares to just $98,571 among those without a coach.
At First Command, we pride ourselves on coaching military families to develop positive financial behaviors that serve you well through every stage of your life. We’ll work with you face-to-face to create challenging but realistic goals and then build you a personalized plan for pursuing them. We offer this as a complimentary service for all active duty military members and their immediate families. Get started setting financial goals with First Command today.
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