Close your eyes and imagine what your dream life would look like a year from now. Now imagine five years from now, then 10 years. Odds are, improving your current financial position plays a role in creating your dream life. Whether that’s to save up for a larger home, to travel the world, or to avoid living paycheck to paycheck.
Our financial position plays a significant role in dictating our future, and it almost always plays a role in realizing our dreams. Luckily, your dreams are likely all within reach. All you need to do is set and stick to defined financial goals.
Setting financial goals
Write down everything you imagine when you think of your life in one, five, and 10 years.
Then, use this list to distill what financial benchmarks you need to meet in order to make these dreams a reality. This is a good starting point when setting your financial goals because without a tangible ending place, it can be hard to know where to start and to keep yourself motivated down the line.
But, remember to be realistic.
Saving a million dollars within the next year is not a tangible goal for most of us. Set goals that you know are within reach so you can make real progress towards achieving them.
Once you have a good idea of what you want to achieve, it’s good practice to segment your goals into three buckets: short, medium and long term.
Short-term goals are those you want to achieve within a one-year time frame. They could be anything from paying off your credit card debt to establishing an emergency fund. The general idea is that your short-term goals should set the foundation for a strong financial future through removing as much debt as possible. This helps to ensure that you have a strong budget to work off of going forward.
Medium-term goals usually take place over a two- to five-year time frame. These goals typically focus on paying off any larger financial obligations such as a mortgage, student loans, etc.
Getting yourself to a position where you’re debt-free should be a core focus. You will want to start using your savings to create your future rather than continuing to address your past. Beyond long-term financial obligations, your medium-term goals can always include those splurge items like a new car, home renovations, or that dream vacation.
Finally, your long-term goals are anything that exceeds that five-year benchmark. Typically, long-term goals tend to center around retirement planning and ensuring you can maintain your lifestyle after leaving the workforce.
Reaching your goals
Now that you’ve set tangible and realistic financial goals, the next step is to actually reach these goals. Here are some things you can do to keep yourself on track.
Set an effective budget
The first step in meeting your financial goals is getting a clear picture of your current financial position. You won’t be able to move forward if you’re not sure where your money is going each month and where all your current obligations lie.
Find a budget system that works for you and create smaller monthly goals that you want to meet in order to reach these bigger, long-term goals.
Keep yourself accountable
Setting goals and a budget won’t be effective if you don’t commit to them and stay on track. Regularly check-in on your spending to see where you’ve made progress and where you’re still lacking. This will help you stay accountable and on track to meet your goals. It can also be beneficial to do a comprehensive review each year and ensure your financial goals still align with your dreams and that your budget and savings plan remains realistic.
Life changes quickly and your strategies and goals will likely change as well.
Pay yourself first
One of the best ways to keep your savings on track is to begin paying yourself first. What this means, is to decide upon a fixed amount to put into your savings account each month and have this be the first bill you pay. Paying yourself first should come before your groceries or rent so that you can guarantee something makes it into your savings account.
Consult an expert
If you feel like you could benefit from customized financial advice, consider speaking with a financial advisor who can help you build a tailored strategy. A financial advisor can also assist you with investments and other opportunities that may help you achieve your financial goals.
Setting financial goals is a critical step in building your financial future. Start now to get yourself that much closer to realizing the life you always imagined.
Be sure to tune back in throughout the month of November for more from all of us at Centum Home Lenders. We are always willing to help answer your questions directly. You can get in touch with us here!