To see how I personally put these ideas into action and set my own financial goals, check out the level 2 post: My Financial Objectives, which includes a free download of a worksheet to set your own financial targets!
One of the most important steps you can take towards becoming financially independent is making clear what your goals are. There is nothing more powerful than having a specific end objective that you are working towards to. Without stating your goal it is easy to give up after only a few initial attempts as you forget why you started this journey in the first place and because you have no way of measuring whether you are any closer to your target.
Numerous studies have furthermore shown that if you write down your goals you significantly increase your chances of ultimately achieving them, with some studies saying the likelihood of success increases by as much as 50% or more. So it is definitely worth stating your goals if you want to really achieve success on this mission!
Once you’ve set yourself your goals, they become your guiding principle, your cornerstone of all future money decisions that you make and your encouragement to not give up when the going gets rough and the temptation to quit the mission is increasing.
The aim of this step is to set goal(s) that you can focus on during this mission. The goal(s) should be specific and with a clear timeframe though, so “I want to save more money” is neither specific nor time-bound, meaning it’s not a very powerful goal, as it doesn’t say when you want to achieve this goal by, nor does it say how much “more” is. E.g. saving $1 extra a week would in theory already be “more”, but is that really your goal? A better goal would be “I want to have saved $10.000 in 2 years’ time” for example. You also want the goals to be challenging enough to require some effort (i.e. if you are already saving about $500 a month, you will easily get to those $10.000 in less than 2 years..).
Please note that in these examples I have decided to use Dollars ($) as a generic currency, but instead of dollars it could also read Euros, Sterling Pounds or any other currency that you identify with most.
Step 2 – Set Financial Goals – in detail:
- Grab a pen and paper or use a digital programme such as Word or Evernote and write down some of the reasons why you joined this mission. Below are some questions to help you get started:
- Is your administration a mess and do you have no idea what you are paying out? Are you looking to get organized so that you have a clear picture of what happens to your money?
- Do you spend too much and are you looking to cut your spending?
- Are you wanting to save (more) money?
- Have you got debts that you want to get paid off?
- Are you worried about your financial future and want to plan ahead for your pension?
- Using the answers to the questions from above, or your own additions, write down several goals you want to achieve with a clear outcome and time limit. The goal might take you week, months, years or even decades, so it should be something that you feel strongly about. Some ideas below:
- In 3 months I want to be on the right saving track and be putting away $250 per month into a savings account.
- I want to pay off my credit card debts and student loan in 3 years’ time.
- I want to have paid off my entire mortgage by 2025.
- I want to have a net worth of €1.000.000 in 15 years.
- As you can see, some are further in the future than others, some are slightly more ambitious than others, some might not be applicable to you (maybe you have already paid off any student loans or debts), and some you might not even want to achieve (maybe you don’t want to be a millionaire?). Set what is right for you and what you feel is going to motivate you to put in the time to get to your goal.
- Decide what you feel is the right number of goals to have. You might want to just have 1 or 2, or you might feel comfortable having 4 or 5 goals at the time. Pick the right number of goals you feel you can handle and leave the other ones for what they are for now. (We’ll come back to them in the future). Make sure that if you have several goals that they are all doable at the time (i.e. “I want to pay off my $50.000 student loan in 2 years”, and “I want to save $40.000 for a deposit on a house in 1 year” might not be realistic to focus on at the same time. Maybe you first want to pay off your loan and then start thinking about a deposit).
- Write your goal on another card that you can take with you, add it to your mobile phone reminders, share it with your WhatsApp group, write it in your journal or find any other way that works for you so that again you are reminded daily about your goal.
It might not always be easy to achieve your goals, and I am sure there will be ups and downs on your journey. But now you’ve got your goal written down, you have the most important part done: clarifying what your end destination is. So let’s continue our mission and start progressing towards those goals 🙂