What Are Financial Goals?
Financial goals are the priorities and targets you set for how you want to spend and save your money. They aren't one size fits all, because everyone has different priorities. However, if you don't set your financial goals, you'll probably be left wondering where all your money went.
Importance of Setting Goals
Setting financial goals helps you to keep the big picture in mind rather than getting bogged down with day-to-day (or paycheck-to-paycheck) expenses. In addition, it's easier to avoid impulse purchases. For example, if you know that you're saving $100 every paycheck toward a Christmas vacation (or other financial goal), it's easier to turn down the snazzy new suit or stylish new purse that you really don't need.
Prioritizing Your Savings
Planning ahead with financial goals gives you an opportunity to decide which ones are most important to you. For example, you probably won't be able to save enough to retire at 50, pay for private college and graduate school for your kids and take a vacation every year. This isn't to say that certain goals are always more important than others. Usually, resolving conflicts between your goals requires examining how you think about money -- and the things that you can buy with it.
Making Goals Now
There's no time like the present to begin setting your financial goals. The further in advance you plan, the less you have to carve out of your budget to pay for it. For example, if you want to buy a $12,000 car in one year, you have to sock away $1,000 a month. But, if you start saving four years in advance, you only need to find an extra $250 a month. Plus, the longer you have until you reach your goal, the more you can put the power of interest compounding on your side.
Tracking Your Progress
Once you've set your financial goals, stay on top of them by monitoring your spending and saving. For example, entering your financial data into a software program like Quicken allows you to see how you're doing and, if you're behind on your goals, how to get back on track. If you don't have measurable targets for your savings, you won't know how you're doing, and might not know you're behind until it's very costly to catch up.