How to Set Goals to Overcome Household Budget Issues
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Review Your Current Finances
You can set better goals if you have a clear idea of your current personal finances. The University of Nebraska recommends that you sit down with your partner and go over everything: how much debt you carry, how much you save each month and how much you have saved already. It's also important to track your current spending so you know where you can make cuts. "A number of people really don’t know how much they spend," Lazarus says. She points out that if your savings aren't increasing, you can look at your paycheck and "pretty much assume you’re spending all that money."
Identify the Challenges
For many people, the biggest financial issue is that they're not paying down debt as fast as they'd like. Others want to save faster for a down payment on a home. To set goals, it helps to identify the issues you're most concerned about and rank them in order of importance. When ranking, Lazarus advises that you think in terms of what you stand to gain from each.
Set Financial Goals
If you have a lot of issues you want to tackle, it can help to be flexible in setting your goals. For example, if it's a challenge to meet your goals for both a college fund and a retirement fund, Lazarus suggests putting the college fund in a brokerage account. If you adjust your priorities later, you have more flexibility in how you use the money than if you put it in, say, a 529 college-savings account. Lazarus says she usually recommends a six-month financial cushion as a top goal but "one of the rules of thumb is that goals always need to be tweaked for each person's circumstances."
Adjust Your Goals as You Go
Nothing, including your personal finances, stays the same forever. If you start making more money, or your spouse quits work to stay home with the kids, you need to re-evaluate whether your original goals are still achievable. "Projections probably have 30 assumptions built in," Lazarus says. "You shift one by a tiny, tiny amount, the outcome shifts." This may not matter much when you're starting out, but the further along you go, the more important it is to check your progress.