As you plan your spending, you must decide what’s most important to you. That includes defining and writing down your goals. Goals are specific outcomes you strive and work for. They are different than dreams or “New Year’s Resolutions.”
Your goals are based on your underlying values. For example, if education is something you value, then your goal may be to have your children attend college. This goal may then guide your financial decision-making, leading you to begin a savings plan to provide funds when the children reach college age.
Goals can change as your interests, income, life-style, and personal circumstances change. For example, if you get laid off from your job, you will probably set aside some less-important previous goals, at least temporarily.
The first step is to identify your goals – or what you want to get done. Some goals are short term – this week, this month, or this year. Examples of short term goals might be: buying enough groceries for the week; buying shoes for your children; or getting a new coat. Some are for later – one to 3 years – such as paying off your credit card debt. Other goals are for the future – perhaps 5 years and beyond – and might include saving for a college education for your children or buying a house. Any goal that takes five years or longer is known as a long-term goal.
To be successful, goals should be SMART:
- Specific – This is what you plan to do.
- Measurable – You should be able to tell if you are achieving your goal.
- Agreed Upon – “This is something everyone in our household agrees should be done”.
- Realistic – Goals fail if they are not realistic or achievable.
- Timed – Goals should have beginning and ending dates.
Try your hand at writing a SMART Goal.