How to Set Financial Goals
Setting Financial Goals
Did you know that only about 47% of Canadians use a budget to keep track of their spending habits?
While some people might think they have a handle on their finances, it’s clear that some struggle more than others.
In fact, more than half of the people in Canada believe they will never be completely debt-free.
While those numbers and facts might seem grim, they don’t have to be a reality for everyone – including you.
Whether you’re tired of being in debt, you’re on the brink of bankruptcy, or you just know you need a bit of help managing your finances, setting financial goals for yourself can make a big difference.
Setting financial goals is about more than trying out a new kind of commitment, or making a new resolution that you’ll give up on in a matter of months.
If you feel as though you’ve tried to create financial goals for yourself in the past but they’ve never lasted, maybe it’s time to take a new approach.
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What Are Financial Goals?
This is a bit of an open-ended question, since everyone’s financial goals are different.
Let’s look at a staggering statistic from the U.S. as an example.
Currently, about 58% of Americans have less than $1,000 in savings.
Is that something you can relate to?
Maybe, instead of having no money in savings, you have thousands of dollars in credit card debt.
Or, maybe you don’t have a retirement fund for yourself.
People tend to panic about finances for different reasons.
But, you can use those concerns to further develop your financial goals and spring them into action.
Some examples of common financial goals include:
- Getting out of debt;
- Limiting your use of credit cards;
- Creating a savings account with more than $1,000 balance;
- Putting money into a retirement fund each month.
No matter what your goals are, it’s important to know how to implement them – not only the right way, but the SMART way.
What Are SMART Financial Goals?
Taking a SMART approach to your financial goals involves more than just thinking them through.
Using the S.M.A.R.T. acronym can help you to better understand your goals and break them down into more manageable pieces.
From there, you can create an effective strategy to help you achieve them in a timely manner.
So, what are SMART goals?
- S – Specific
- M – Measurable
- A – Attainable
- R – Realistic
- T – Timely
Let’s dive in a bit more to understand how SMART goals can work for your finances.
Creating Financial Goals that Are Specific
If you’ve tried setting financial goals in the past, you may have used generalities.
This time, try to be as specific as possible with your goals.
Ask yourself things like:
- What exactly do I want to accomplish?
- How much money do I want to save?
- What is the timeframe I can give myself to reach this goal?
- Who can help?
Your goal needs to be clearly defined so you have an accurate picture of exactly what you want to achieve.
When you set broad, open-ended goals, they are too easy to modify or adjust, and eventually you might give up on them, altogether.
So, how can you be specific when it comes to your financial goals?
Let’s say you want to pay off your credit card debt.
Instead of making that large, sweeping goal, get specific with exactly what you want to do.
Telling yourself your goal is to pay off $1,000 on one credit card over the next six months is a very specific goal that can make it easier for you to stay focused and determined.
If your goal is to save money, be specific with that, too.
Instead of just saying, “I want to save more money this year,” your goal should be something like, “I want to put away $100 into a savings account on the 15th of each month”.
Making it Measurable
Having specific goals makes it easy to measure your successes, which can result in you being more motivated to continue.
Using the same example from above, if you want to put away $100 into a savings account each month, you will quickly start to see how that adds up.
You’ll be able to look at your bank account and measure your savings.
If your goal was to pay $1,000 toward your one of your credit cards each month, you will be able to see in your statements how those payments are impacting your debt levels and your credit score.
Not only does a measurable goal help to keep you on track, but it can give you a better idea of whether your goal is attainable.
The Importance of Attainable & Realistic Goals
Speaking of attainable goals, it’s another important factor when it comes to being ‘SMART’.
It’s okay for your goals to be lofty sometimes, but they still have to be attainable.
As of 2017, the average salary in Canada for a full-time employee was just over $51,000 a year.
You may make more or less than that, but whatever you’re bringing in each month needs to be considered when you’re creating your financial goals.
Keep in mind that your goals should challenge you, but they shouldn’t be so difficult that you give up on them or feel defeated.
Attainability goes along with the next step of making SMART financial goals – being realistic.
Let’s use the same example.
If you want to save $100 each month into an account, you have to ensure that you’ll have an extra $100 to spend.
You can’t just suggest it’s something you want to do without knowing where that money will come from.
One way to make that happen is to take a look at your budget and decide where you can move money around.
Maybe you’re a part of a subscription service that you can cancel.
Or, maybe you can cut back on eating out each month and save money that way.
When you look at your budget, it becomes clear where you’re spending, and how you can cut back to start saving.
If your goals seem unattainable or unrealistic, it’s okay to give them a second glance and readjust them as needed as you work toward them.
If you’re not used to setting financial goals, it can take time to realise what is actually feasible and what isn’t.
It’s better to scale back on your original goals, rather than to give them up completely.
Over time, you’ll have a better idea of what you can accomplish and what it takes to get things done.
Give Yourself a Time Limit
One of the issues people tend to face when they make goals is they don’t set a time limit for themselves.
That makes it far too easy to “slack off,” or to keep procrastinating on the things you want/need to get done.
If you keep pushing back the dates for your financial goals, you may eventually push them back to the point where they just don’t get done.
So, give yourself a set amount of time for each of the goals you want to accomplish.
Remember, they should be realistic and attainable timeframes.
You should want to set yourself up for success, not failure or just to feel overworked and overwhelmed.
Giving yourself a time limit on your goals helps to hold you accountable and can cause you to work harder to reach those goals within that limit.
If you really want to hold yourself accountable, you can talk to someone else about what your financial goals are and the timeframe in which you want to achieve them.
Or, write them down in a planner or journal.
Sometimes, simply letting someone else know or even having something to look back on can help you to stay on track and not give up so easily on the goals you’ve put in place.
Setting Yourself Up for Financial Success
It’s far too easy to set financial goals and never follow through.
If you know you need to make some financial changes – either now, or for your future – having these goals are important.
So, don’t shy away from creating new goals and using the SMART method to put them into practice.
If you’re truly struggling with financial management and you need some help getting started with your goals, feel free to contact Bankruptcy Canada for more help.
We’ll be happy to answer any questions you might have, whether you’re worried about bankruptcy, debt consolidation, or financial management.
Our team of experts can help you to realize your financial goals from start to finish, not only ensuring that you can get out of debt right now, but that you can find financial freedom for the future.
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