This is BUDGET Boot Camp, why are we talking about goals?Like anything that requires consistency and diligence, budgeting can be hard. Goals will keep you motivated by reminding you what you're working towards. Just like dieters who post motivational pictures and quotes on their fridge, financial goals will help you push through the tough parts. Endorphins are not limited to marathon runners. Just wait until the first time you get your budget in place, start checking it regularly, and watch how it puts you on track to reach all of your financial goals!
Do you have financial goals?I hope so! Let me ask you this--Do you have financial GOALS or do you have financial DREAMS? What's the difference? DREAMS live in our heads. GOALS are written down, planned for, and reviewed often. Which do you think is more likely to happen? The answer is obvious, so read on to find out how to turn your financial dreams into financial goals.
|One of my financial goals: Get these cute little kiddos to college (and stay sane in the process). Occasionally, both goals feel like a long shot.|
Long Term vs Short Term GoalsYou should have long term financial goals (e.g., get out of debt, save for retirement, save for a house, etc.), but they need to be accompanied by short-term SMART goals (SMART=Specific, Measurable, Accountable, Realistic, Time-bound). It's nice to make big goals, but the short-term SMART goals are where the rubber meets the road--they're how you're going to make your dreams become reality.
Personal Example:Our Long-Term goal: My husband and I want to comfortably retire at 65 and maintain our current lifestyle.
Short Term SMART goal: Every year, contribute 15% of our lifestyle spending to retirement accounts; first, to our 401k (to max out our employer match--FREE MONEY!), then to our Roth IRAs (article: difference between 401k and IRA). For example, if we currently spend about $50,000 each year, we would need to save $7,500 towards retirement each year. A few years from now, if our spending had gone up to $75,000, our contributions would increase to $11,250. If we started doing this at age 25 (see article here), we will reach our long-term goal of retiring comfortably.
So what makes this a SMART Goal?Specific - We know exactly how much we need to save for retirement each year and which accounts to put our contributions into.
Measurable - It isn't a subjective goal--either we saved enough that year or we didn't.
Accountable - My husband and I made this goal together, so we're accountable to each other. You can even ask a third party (financial advisor, friend, or family member) to check in on you and your goals. In addition, our 401k contributions are made automatically.
Realistic - Saving 15% of our income is reasonable for us. We know it's possible, even if it means giving up some extras and not buying that minivan I'm wanting quite yet (*sigh* someday...)
Time-bound - This goal has a specific time-frame. Our drop-deadline for this goal is April 15th of the following year since that is when IRA contributions are due.
To do #2: Write down your long- and medium-term financial goals and their accompanying short-term SMART goal(s).Your BBC assignment for this month (remember, you'll only get one per month): Get out a pen and paper (or pull up a Word document, but be prepared to PRINT) and actually write down your goals. If you're intimidated by setting all your goals, pick ONE long-term goal. Figure out some short-term SMART goals to accompany it. Need help coming up with your SMART goals? Post in the comments section here and we'll get back to you ASAP.
In ConclusionNo matter what goals you are working towards, nothing will help you accomplish those goals faster than having a budget. Write down your goals, get motivated, and get excited because next month, things get meaty. :)
Extra Credit Assignment: Create a Personal Financial Plan(Watch the instructional video here). My husband and I created ours in our personal finance class, but we've found ourselves pulling it out to check our savings goals and balance our investment portfolio.
And to put the "Mamas" in Money Hip Mamas, my favorite Mom product of the month:
THIS is what got my toddler to sleep in and stay in his bed when we transferred him out of a crib.
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