The Importance of Financial Goal Setting

The Importance of Financial Goal Setting

You know why people fail in managing their finances? Because they don’t have any specific finance goals. They have no idea where they are money-wise and where they want to go.

Don’t do this mistake. Always make sure you know what you want. Let’s do a small exercise…

Even if you already know what you want to accomplish, make sure you take the time to work through this exercise. It will help you, I promise. It is crucial because it will become clear how important your finance goals are as you move through the procedure of making out your plan. So let’s begin…

Pick up your notebook or any blank sheet of paper. On the top side of the paper write down:

What do I want from my life?

We have discovered that there is virtually a knee-jerk reaction to individuals writing the accompanying goals:

  • Become debt free and financially independent
  • Retire by age 50 or as soon as possible
  • Buy a big house

If the same goals are true for you, it is all right. Please continue writing. Do not put down those goals and then imagine that you are finished. Not that if there is anything inappropriate or unreasonable with those goals. More often than not, these are the same goals individuals have been disciplined to think about. Whether by mass medium, peers, or parents many individuals believe these are goals they “have to” have. So spend a little bit more time and dig a bit deeper to figure out exactly what you want from life. Be as detailed as you can.

Next step is to clear up, define the main ones and put them into categories.

Where Do They Go Exactly?

Take out the notebook or sheet of paper you utilized in the brainstorming session where you put down what you want from your life. Take a little time to read over the goals you put down. Hopefully at the least a few days have gone by since you made your list.

Do these goals and wishes still add up for what you would like to accomplish in your life? Remove any that do not genuinely feel right with you or don’t make any sense for your future. Add on any that might have come to mind since you made the list. Once again, include all of your goals, even the goals that seem unachievable. Remember, don’t filter anything out t this stage. You will have to do that later. Later, they have to be categorized by timeline and type.

First of all, separate the goals by time line. Which goals do you want to accomplish in the next year? How many are there that you wish to gain within the following 5 years? These are your short-term goals. Generally, a 5 to 10 year time line is average time line. Anything longer than 10 years is a long-tern goal. After specifying a time line for every item on your goal list, categorize them by type.

There are 2 common “types” of goals, for the intentions of this exercise. The first one is ‘psychical things’ such as a Farm House, a Porsche, and a big screen T, etc. You can touch all these things. So they are the first type. And the 2nd type is ‘experience’. Yearly holidays, monthly health club days, additional time with your kids, and quitting work at the age of 50 are examples of “experiences”. Commonly, experiences are not touchable. It may be a private event, like a trip to an overseas destination or something like that.

At the conclusion of this exercise there has to be t least 4 time lines and 2 types. Depending upon the quantity you’re beginning with these may be summed up on a single piece of paper or a few pages. Put them down so that they’re easy to read. One way of achieving this is to draw a line down the middle of the paper horizontally, and then vertically.

To revise, the time lines are 1) immediate, 2) short-term, 3) mid-term, and 4) long-term. The categories are 1) physical things and 2) experiences.

Make sure you complete this small exercise. And once you finish this, feel free to contact us, so we can help you to create a working financial plan that will give you a concrete idea about your finance goals and how to achieve them as fast as possible.

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