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Welcome to Day 3 of the Master A Budget Series! Yesterday, we talked about the Benefits of Budgeting; today, you will learn about Budgeting Goals, what they are, and how to set the perfect goals for your family finance.
Let’s dive in.
Budgeting goals are the reasons why you are budgeting.
Have you ever driven a car without a destination? Sounds crazy, right? That means wasting all your time and gas money for nothing. Or have you ever run a race with no medal or incentive at the end? I did, and I barely showed up because I was not motivated.
When you do your budgeting without any budget goals, it is like driving a car with no destination or running a race with no incentive. You’ll never gonna get there because you are not motivated and there is no THERE.
As with any other aspects of your life, budgeting works best if you have goals.
Why Do You Need Budgeting Goals
Here are some reasons why you need to set not only budgeting goals but any goals in your life.
Goals Give You A Purpose
When you have a goal in life, it gives you a purpose. It gives you a reason to keep doing what you’re doing and strive harder so you can get there faster. Goals give you something to look forward to in the end.
Goals Keep You On Track
Having a goal keeps you on track by making you aware of how far away or how close you are to your goal. It keeps you focused on the steps you need to take to get you closer to the end goal.
Goals Give You Motivation
Life is not a bed of roses and definitely not a smooth road. You might be so pumped at the beginning of our journey but halfway, you might stumble and get stuck. And if you do not have a goal, you will stay down and stuck because you do not have the motivation to get back up and continue.
Goals Hold You Accountable
Having a goal will hold you accountable and will make you focus on tasks that will move you closer to achieving your goals. You’ll make sure that all the actions you are taking are necessary to hit your goals.
Be SMART With Your Budget Goals
SMART is an acronym, introduced by George T. Doran, that is widely used for goal setting.
When you set your goals, it should be specific. Instead of saying “I will be debt-free”, say, “I will pay off $30K in credit card debt”
Instead of saying, “I will save money”, say, “I will save $10K”.
Your goals should be measurable. You should be able to measure how far or close you are to your goal. So if your goal is saving $10K, you should be able to gauge how far you are to your goal (e.g $500/$10K, 25% complete, etc).
All goals should be attainable but challenging enough to push you out of your comfort zone. If your goal is to pay off debt, do not set a goal to pay $100K in a year if you are in between jobs.
Likewise, if your goal is saving money, do not set a goal of $100K in a year if your left-over money after all expenses is $1000.
Setting a goal too high is a perfect ingredient for failure. It can discourage you and can bring a lot of frustrations.
Be wise in setting a goal. The goals you choose should be those that bring a lot of impact on all areas of your life.
Lastly, your goals should be time-bound. Adding time on your goals will give you a sense of urgency. So for your saving goal, instead of saying, ‘I will save $10K”, say, “I will save $10K in 12 months”.
Have a Long and Short Term Goals
Long Term Goals
Long term goals are the ones you want to achieve in 1 year, five years, or 10 years. These can be your ultimate goals in life. Long term goals can be to retire early, fully-funded emergency fund, mortgage-free, etc.
These goals can be daunting because they see to be impossible to achieve. However, if you set short term goals along with these long term goals, they will be more realistic and achievable.
Short Term Goals
Short term goals are the bite-sized goals of your long term goals. For example, if your long term goal is “Save $20K for an emergency fund in 2 years”, your short term goal would be, “Save $833 per month” or, “Save $416 every paycheck”.
As you can see, the long term goal of $20K in 2 years was broken down into 24 months, which is more realistic.
Create A Vision Board
A vision board is a place where you put visuals that will keep you motivated on your journey. It can a picture of a house or a photo of the vacation destination. Anything that you envisioned your life to be once you reached your goals.
If you haven’t yet, download the Master A Budget Workbook to come up with your long and short term goals.
Write all your goals down. Putting them on paper is like putting them out there in the universe. They also become tangible.
There you have it!
Your budgeting goals can be to pay off debt, save money for retirement, save money for a vacation, save money for a house, etc.
By having a goal on the horizon, you will be motivated enough to start your budget and stick with it. And by applying the SMART method, you will reach your goals in no time.
What are your budgeting goals? Why are you budgeting?
Now that we’ve finished talking about the setting your Budgeting Goals, next up on the series is I’ll share with you the things you need to know about Income and Expenses.