Setting goals is a necessary start to achieving a financially secure future, but sticking to those goals is another hurdle altogether. Unexpected expenses, the costs of day-to-day life, and failure to track spending all have the potential to derail any roadmap we may initiate. Read on for actionable strategies to help you stay on track to reach your financial goals.
Be Clear About Your Objectives
Most of us have heard that every dollar should have a name, which means that when it comes to saving, you need to be clear on your objectives. What are you saving for? It could be a down payment on a house, a child’s education, retirement, a dream vacation, etc. Many of us save for a combination of objectives, so it’s also important to be crystal clear on the reasons behind your financial goals. Knowing your “why”—for any goal in life—will create intrinsic motivation. The goal becomes a priority despite whatever external forces are at play.
Establish Small, Attainable Goals
Many financial goals are lofty, whether paying off student debt or saving for retirement or anything in between. They take diligence, consistent monitoring, and a solid framework to reach. In other words, financial goals require micromanagement. If your goal is to save $5,000 for an emergency fund, write down the steps you plan to take to achieve this goal, then put them into action and monitor them constantly. Some of these steps could include, for example, reframing your budget to account for the emergency fund, setting up automated weekly deposits into your savings account, and finding a money managing app that works for you.
Compartmentalize
In order to meet a specific goal, think about dedicating a separate account for it. You can even set up automatic direct deposits so you’re not tempted to use the money for something else. Be sure to label this account with a name that reflects your goal, such as “Early Retirement”. This can be applied to any financial goal. In fact, you may have several different accounts allocated to different goals.
Break Down Big Goals into Quarterly Milestones
Once you compartmentalize your goals, think of your bigger goals in terms of quarterly increments. If you want to save $20,000 in two years for a down payment on a house, rather than focusing on the daunting path ahead, make a plan to allocate a certain amount each month, then review the account every quarter. In this case you would need to save roughly $834 per month. When you see that you’re saving $2,502 per quarter, the end goal of $20,000 in two years is undeniably within reach.
Build a Flexible Budget
In order to reach financial goals like the $20,000 down payment example above, you need to keep spending in check. When you know how much money is coming in and leaving your account on a monthly basis, you can better determine how much you can allocate to different goals. When you create your budget, keep in mind that it should be realistic yet flexible so you can make smart adjustments as needed.
Save Your Raise
When saving for financial goals, aim to save at least half of any raise, bonus, or unexpected funds. Better yet, save it all. As tempting as it can be to splurge on a big purchase, you’ll be happier in the long run when you refrain from impulsivity in favor of staying the course to meet your future goals.
