Decide What You Want to Achieve
Setting goals is as simple as deciding what you want and mapping out a plan for getting it. Many people focus on paying their monthly bills at the expense of their short- and long-term goals. Monthly bills have a way of expanding to use all your available money, making planning for the future a moot point. How can you save for your future when today uses all the money that you generate? If you live beyond your means by using credit, or if you live paycheck to paycheck with nothing left over to save or invest, you'll never get ahead.
Go for the Goal
Think seriously about what you want to achieve. Do you envision retiring while you're still young enough to enjoy travel or an active lifestyle? Would you like to buy your first home or move up to a larger home in a better neighborhood? Is having a vacation home in the mountains or on the beach your dream? In the shorter term, maybe a new car or a boat is on your wish list. What's important to you?
Your goals should be just that:
Don't let fear of failure cause you to set goals that aren't ambitious enough. You want to stretch yourself a little to reach your goal, but you have to believe that it's possible or you won't stay motivated for long. Try to strike a balance.
Put It in Writing
Whatever your goal, simply dreaming about it won't make it happen. A goal should be written down and reviewed often. Written goals give you something to work toward and make your efforts to save more meaningful, but figuring out how to achieve your goals is just as important as stating them.
Include a description of the goal, the time frame for achieving it, the amount of money needed, the amount already saved, and your plan for achieving the goal (for example, putting aside $100 a month, working ten hours of overtime a week, cutting entertainment costs in half, or getting a second job). Having a deadline for achieving your goal creates a sense of urgency that makes it easier to stay focused.
It's easy to get off track or drift along without making any real progress if all you have is a few vague dreams, so when writing down your goals, do it in enough detail to give yourself a visual each time you read it. If you're saving to buy a house, don't just write down “buy our own house.” Write so you can almost see it: “I want to buy a cozy Cape-style home with a water view on two or more wooded acres on the coast of Maine.” Each time you think of this goal, picture this cozy home in your mind in as much detail as possible. The more vividly you can imagine what your goal will look like, feel like, and smell like, the better chance you have of achieving it.
One of the hardest adjustments for married couples is reconciling the differences in what's important to them individually and developing common goals. Daily financial tension can be high if the couple doesn't resolve the differences in their goals and come to a compromise that they both can live with.
A Few Ideas to Get You Started
Your financial goals may include saving for a down payment on a house, making home improvements, buying a new vehicle, paying off a loan, saving for graduate school or for your kids' college education, putting away some money for a dream vacation, or saving for a large purchase such as a computer or new furniture. You may have the goal of being able to afford for you or your spouse to stay home to raise your kids without putting them in day care. In short, your goals should reflect your own values and dreams.
Your Net Worth Statement can be a valuable tool for finding clues about what your goals should be. If your short-term liabilities (due in a year or less) are greater than your current assets (cash and cash equivalents), paying down credit card debt may be your first priority.
