How to Effectively Set and Track Goals

Why set goals?

Setting goals is one of the most important things you can do to ensure financial success, but it is usually the last thing people think about. If you don't set goals, how do you know if you are actually being successful? If you are going to get to where you want to be in life, you have to know the path to take. Goals are your roadmap and if you set them up right, they will take you from point A to point Z with as few detours and as little pain as possible.

How to set goals

The key to goal setting is to make your goals concrete and measurable and to make meeting them automatic. By this I mean, your goal should have a date and amount associated with it. You don't just say “I want to pay down my debt.” You say "I want to reduce my debt by $5,000 over the next 12 months." By giving yourself a set $ amount and date to meet, you will be able to judge whether you are actually meeting your goals or not and make adjustments accordingly.

By making it automatic, I mean using technology to your advantage. Set up automatic payments for all of your bills so that you are never late. Set up an automatic deduction from your pay check that goes directly to your savings account so that you are paying yourself first and will be less likely to spend the money instead of saving it.

Just doing those two things:

1) Making your goals concrete, and 2) Making them automatic,

will drastically increase your chances of success.

The timeline

Goals can be divided into 3 categories: Short-term, Mid-term and Long-term. Short-term goals are goals that will be completed within the next 12 months. Mid-term goals are ones that will be completed within the next 1-7 years. Long-term goals are goals that will be completed 7+ years from now. Some examples could be:

• Short term – establish emergency fund of $1000
• Mid-term – pay off consumer debt within 3 years
• Long-term – have enough for retirement

One of the biggest challenges is being realistic! If you only make $40k/year, it won’t really do you much good to set goals that will cost you $20k/year to meet. Be honest with yourself about what you can do. If you find that you are ahead of your timeline for meeting your goal, you can always add another one or meet your goal early but if you find that you are behind, it can be disheartening and cause you to give up all together.

The process

As I mentioned above, to set your goals you have to set specific criteria as well as an action plan. Please open the accompanying excel workbook and click on the Goal Summary tab. I have taken the liberty of filling in some goals for you that should be on everyone’s list. Remember, that your goals don’t all have to be responsible. Your goal can be to buy a new TV or to go on a vacation. Doing this just means that you will be more likely to meet your goal without sacrificing something else. For your personal goals, fill out the following information for each goal:

1. Goal Name
2. Start Date
3. End Date
4. $ Needed
5. First Step

If you are married or in a similar relationship, you should do this with your partner.

Once you have set at a few goals in each category, print out that page and put it somewhere you will see it every day. It will remind you of what you are working towards and keep you on the right path. I would also suggest writing your most important goal on a sticky and attaching it to your credit card so you have to see it any time you want to use your card. That way you will know that every penny you spend on that card is a penny that is not taking you closer to your goal.

Make a plan

Now that you know what your goals are you need to plan how to meet them. In the same workbook is a tab called Detailed Goal. You should make as many copies of this as necessary – one for each goal. I would recommend re-naming the worksheet to reflect the name of your goal.

Implement your plan

So, you’ve gone through all the planning, now you just have to execute. The key to achieving your goals is to make them as easy to do as possible. This means making everything automatic. Set up all of your goals so that you don’t even have to think about them. Use auto bill pay and auto deductions to your savings. It takes a bit of time at first but it will be worth it in the long run.

Monitor/Add to your goals

Your goals are always going to be changing. You should keep adding goals as they come up. When you add a new goal, you have to look at your existing ones and figure out which is more important. It may be that your new goal is more important than one of the old ones so your old one gets pushed down the list. Look at your goal list as a fluid thing and don’t try to be too rigid with it. There is nothing wrong with reprioritizing as thing change.

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by personalfinance101.org