Published On: Thu, Sep 8th, 2016

Set Financial Goals in 3 Easy Steps

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Without a goal in mind, you will wander aimlessly. You must set goals. In particular, you should set financial goals. Whether you’ve met your goals or not in the past, it’s the perfect time for a fresh start.

Maybe you have a goal to become a millionaire.

Becoming a millionaire may seem out of reach. The media has painted millionaires as people who live in huge mansions, wear flashy clothes and go through money like it’s water. It makes for a great reality show synopsis. But this is not the life of a typical millionaire.

Most millionaires look about like you and I. They dress like us, go to the same places as we do, and some of them may even live next door. I’m talking about self-made millionaires and not millionaires who were born into wealth or given a substantial inheritance. You can become a self-made millionaire as well. It all starts in your mind. Let’s begin the process.

Changing Your Beliefs to Set Financial Goals

Your beliefs have a huge impact on your financial situation. If you believe you will never make more money, you most likely won’t. If you believe you will never become a millionaire, it won’t happen.

Positive thinking is the key and it’s a trait anyone can acquire. Positive thinking can change your outlook on life despite what obstacles block your path to riches.

Imagine this… you graduate college and the job market is tough. You go on interviews for months with no luck. Your savings account is running low and your student loans will be due soon. You end up settling for whatever you can find for now but the pay is not great.

Instead of settling less with a lower paying job you don’t like, try freelancing or creating your own source of income. Reach out to potential clients and build your own business. Create your financial destiny.

In his book, Secrets of the Millionaire Mind (partner link), T. Harv Eker talks about how anyone can master the inner game of wealth by changing your mindset. Here are some key quotes and principles outlined in the book:

  • Rich people believe ‘I create my life’. Poor people believe ‘life happens to me’.
  • Rich people are committed to being rich. Poor people want to be rich.
  • Rich people choose to get paid based on results. Poor people choose to get paid based on time.
  • Rich people think “both”. Poor people think “either/or”.

T. Harv Eker went from bring broke to a millionaire by using these principles. You can too.

Creating a Plan

Changing your mindset about money will help bring money to you. All self-made millionaires created a plan at one point on their road to success. “Luck” is rarely uttered by these money-makers.

Jot down your goals for your life. Regardless of how outlandish they sound, believe in them. Some people write themselves blank checks or create vision boards to map out their millionaire lifestyle. Focus on strategies like spending less than you earn, valuing experiences and financial independence over material items, investing your money and allowing it to work for you.

Create an entrepreneurial mindset so you can earn more money efficiently.

Focus on offering people value. After all, money is just the tangible representation of value. If you want money, you must offer something for others to value.

Again, creating a plan, believing in it and following through won’t be possible until you change your mindset and realize that you can become a millionaire. It’s not going to be easy, but it is attainable.

If you have a lot of goals or too few specific goals, it can be difficult to set solid goals for the year and focus on achieving them.

Here are three easy steps to take to help you set financial goals that are both realistic and attainable:

Step 1: Determine Your Short-Term and Long-Term Goals

All of the things you want to achieve may have a different timeline. Some common financial goals include paying off debt, buying a home, building an emergency fund, saving for retirement, or taking a vacation. All of these goals cannot be completed at once.

Determine which goals are short-term and which ones may take longer to achieve so you can set realistic expectations throughout the year.

Step 2: Prioritize

The next step is to prioritize your goals in order of importance. Just because a goal seems far away, doesn’t necessarily mean it’s less important to you. For example, some people value investing early over paying off debt if they have low interest debt.

Figure out what goal is most important for you to achieve this year. Make that your focus. Then, add two or three other goals to prioritize after your main goal. Break your goals down into reasonable chunks and keep a limited number of goals to make them more attainable.

Two of the main reasons financial goals aren’t met each year is setting too many goals, which can reduce your overall focus, or not breaking your goals into smaller chunks, which can cause you to lose motivation over time.

Consider your current income situation, along with how long it would take on average to meet your goals.

Step 3: Create an Action Plan

After you’ve determined what your goals are going to be for the year and have prioritized them, it’s time to create a plan of action for the year. Part of the goal setting process involves specifically figuring out the ‘how’ and the ‘when’ for meeting your annual goals.

Your plan of action should include specific details regarding what you plan on doing each month to work toward your goal. If you broke your goals into smaller chunks, your to-do list shouldn’t seem too overwhelming.

For example, if your goal was to build up your emergency fund before paying off debt, you may want to set a reasonable amount to save for a few months before tackling your debt. Or make smaller payments on your debt for the first half of the year while you work on building your emergency fund.

Need motivation? Here’s how I paid off over $22,000 of credit card debt in 3 years.

If you’d prefer to have a large cash cushion, you may even want to focus on building your emergency fund for the entire year and paying the minimum on your debt for the first year.

Last year I focused mainly on paying off my high-interest car loan off while paying only the minimum on my student loans. With the car loan finally out of the way and paid off, I can focus my full attention on my student loans and other goals this year.

As you can see, there are plenty of avenues you can take when it comes to creating your plan of action. This is why it’s so important to follow each one of these steps.

Overall, these three easy steps will help you set realistic and attainable goals that you can keep, work toward and meet.

What are your goals for 2016?

One of the biggest decisions for a recent college graduate is deciding whether or not they want to pay down their debts or (re)establish an emergency fund beforehand. I personally don’t believe one is more important than the other.

I long to pay down my current debts including $20,000 in student loans and my $9,200 car note, but I still like the idea of having an emergency cash cushion should any unexpected life events pop up.

So I plan to do both, at the same time.

To do this, of course I’m cutting down on my expenses and trying to increase my income, but I’ve also created a win : win compromise plan that will help me meet my financial goals.

Without even considering any side income I will or won’t make in the future, I’ve decided to work with what I have so far and take all my wants and even needs into account to decide what I’m willing to give up (paying for) and what I’m not willing to give up.

I put ‘paying for’ in parenthesis because I’ve reached a point in my life where I’m determined to be done paying full price for certain things. I can definitely make my current income stretch enough to pay down a reasonable amount of my loans and build a solid emergency fund by my debt free date.

What I’m willing to give up (paying for):

  • cable tv
  • fancy phone
  • eating out, take out lunches
  • going out a lot (bars and clubs)
  • mani/pedis every 2 weeks
  • convenient and fancy food
  • credit cards

What I’m not willing to give up:

  • quality outings with friends and family
  • tasty food
  • favorite tv shows and movies
  • Internet
  • car
  • occasional shopping

How It’s a Win : Win

When I get rid of things I’m willing to give up completely or just stop paying full price for, I unlock more of my income to work toward my two financial goals and I still get to keep the things that are most important to me.

For example, when we moved last month I didn’t consider ditching cable a major loss since my boyfriend, my 4-year-old son and I all watch very specific shows, we weren’t utilizing all those channels anyway. I now only pay for Hulu while he pays for Netflix (we’re trying out Amazon Prime* for free this month) and we stream our shows via Chromecast ($35 one time fee) to our television.

I don’t really care about having a fancy iPhone or a phone at all for that matter, but since the price was right, I just recently started a prepaid service with Republic Wireless, a WiFi based phone service, where I get to keep a smartphone and only pay $10/month.

I also even found a friend who can do my mani/pedis for a fraction of the cost I would pay at the nail salon.

However, not eating out so much is a sacrifice for me since I’m a big foodie, but I faithfully commit to bringing my lunch to work every single day, and the payoff is nice. I also love to cook and try new recipes so I make fresh bread, delicious homemade pancakes and all baked goods and cooked dinners at home.

I’ve realized that if you can learn how to cook or prepare your favorite meals and snacks, it will prevent you from buying take out all the time and wasting money at restaurants. Make your food at home taste like the restaurants!

Guilty Pleasures

Living in a small college town actually has it’s perks.

I live on the quieter side of town so we’re not being drowned out by house parties every night but at the same time we can take advantage of free activities and events in the area – which occur almost every week!

Quality time with my family and friends is extremely important to me and I refuse to miss out on memorable moments and good times due to my debt, but I also refuse to pay crazy amounts on expensive, over-priced activities.

There’s a great variety of free events and things to do with my son year-round including festivals, Lego building nights, petting zoos, movie screenings at my college’s football stadium and tons more. For myself, cutting back on the price of fun is not so easy.

Fortunately, we live very close to a few bars with no cover so my boyfriend and I can enjoy a night out without spending too much if we want. I use Groupon and other discount sites to find fun things to do and Swagbucks* for gift cards to go to restaurants.

Sometimes just having friends over and watching movies does the trick.

Shopping is my ultimate guilty pleasure.

I’ll be sharing my monthly budget soon and you’ll see my budget for clothes is pretty much TBA. Part of this is because I have enough clothes as it is, but I also only shop during peak sale seasons now.

Most months I won’t spend a dime on new clothing and when Labor Day and Black Friday sales roll around I’ll splurge a little so I can get my fix. Shopping feels even better when you shop during a huge sale.

Time and Dedication is Key:

Time is the biggest item on my list of things I’m willing to give up. It takes time to find deals, discounts and develop a strategy to cut back on expenses in order to reach your financial goals. It takes time to cut coupons and cook your own food 98% of the time; but in my opinion the time I ‘give up’ totally worth it.

I make it a fun game to see how much I can DIY and save each month. By being competitive in my game and dedicating the time to reach my goals by my debt free date, I’m saving an average of $400 each month ($4,800 per year) than can be put toward my emergencies savings, student loans and my car note.

What can you do without and what are you done paying full price for?

Develop your own win : win list and strategy to implement and see what you come up with!

If you haven’t set financial goals, then you’re probably not taking your finances seriously.

Here are 5 Signs You’re Not Taking Your Finances Seriously

Have you ever felt like you just couldn’t get ahead financially? Not having a solid grip on your situation can start to take a toll after a while…

If you find yourself constantly worrying about money, it may be time to start getting serious about your finances. Here are 5 signs you may not be taking your finances seriously:

1. You Have No Emergency Savings

If the unexpected happened (think busted car, leaking refrigerator, or ruptured spleen!), would you have any savings to fall back on? No matter what your situation is, everyone should have an emergency fund. Emergencies don’t exclude certain people. Emergencies happen to everyone.

A good rule of thumb is to have anywhere between 3-6 months’ worth of expenses in an emergency fund. If you have debt to pay off, you may just want to start with $1,000 to $2,000 in your emergency fund and build the balance up slowly.

Every time you get paid, instead of spending every dime you earn, put some money towards an emergency fund.Even if it’s only $10, $50, or $100 per week – every cent counts puts you that much further from a financial emergency. Having an emergency fund gives you peace of mind and reassurance that you’re financially prepared for unexpected expenses.

2. You Overdraft and Pay Late Fees Often

If your bank account is constantly going into overdraft or if you’re being charged for late fees, it may be time to reassess how you handle your finances. When you spend out of impulse, without knowing how much money you have in the bank, it can lead to costly consequences. Overdraft fees aren’t cheap and late payments can have a negative effect on your credit score.

Your bank account balance and your monthly bill due dates are two things you must be aware of. You can start taking your finances seriously by checking your account daily. You may also want to write down when bills are due and post a note to yourself in a location you will see every day. I like using the refrigerator but an electronic reminder on a smart phone is another popular option.

3. No Budget Whatsoever

Creating a budget is one of the first steps to take when you start getting serious about managing and improving your finances. Without it, you’ll have no idea how much you’re spending or where your money is going each month.

a budget gives every dollar a job

People who don’t budget have what I call ‘missing money’ at the end of the month. Missing money is money you know you spent but have no idea what you spent it on. For example, let’s say you made $2,500 last month. You know you have fixed costs of $2,000 each month. At the end of the month, you have no money left over. So where did the $500 worth of missing money go?? Who knows.

If you’re trying to get your finances in order. missing money is a big setback but can easily be avoided by establishing a budget. While budgeting apps and spreadsheets will help you get organized, you can take a simpler approach. A pen and paper will work just fine. The point is to be responsible with your money and create a purpose for it.

4. Covering Expenses with Credit Cards and Not Paying Them Off

A lot of people misuse credit cards by treating them like free money. This is a recipe for disaster. Misusing credit cards is one of the most common ways people end up financially depressed.

Credit cards should only be used sparingly and in a controlled manner – or not at all if you’re not ready to manage them! Lots of people get along just fie using an all cash budget. However, if you are going to use credit cards, you should always aim to utilize less than 30% of your credit limit each month. This not only helps improve and control your financial situation – it helps your credit as well.

In addition to maintaining a low utilization rate, it’s crucial you pay more than the minimum balance each month. Paid cars off in full each month, if possible. Credit card companies make money based on the interest people accumulate by leaving a balance on their account. This is why it’s wise not to carry a balance. That way, you can use the cards for free!

5. You Aren’t Properly Insured

To refuse to become insured is almost like walking around and telling everyone that nothing bad is ever going to happen. How silly. Having confidence and a positive attitude is great, but just like with an emergency fund, it’s important to prepare for the unexpected. Protect yourself.

Sometimes expenses like car insurance, life insurance, health insurance, and homeowner’s/renter’s insurance can seem like a waste of money. But they often are not. A little money upfront can save you in the long run.

Getting properly insured is a responsible step to take when you want to protect yourself, your loved ones and your assets. You the internet to avoid nagging sales pitches. Easily find the policies you like. Insurance will help provide peace of mind along with financial stability.

How are your preparing to take your finances seriously?

(*partner link)
Source: Young Finances

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Did you know?

African Americans are significantly more likely to have some type of debt (94%) compared with the general population (82%). Credit card debt, student loan debt, and personal loans are all significantly higher in the African American community.

Source: Prudential’s 2013 "African American Financial Experience" study