Table of Contents
Chapter 1: How to Determine Your Financial Goals
Chapter 2: Setting Priorities to Reach Your Financial Goals
Chapter 3: Short Term Goals vs. Long Term Goals
Chapter 4: Focus on Feasible Financial Planning Goals
Chapter 5: Review Your Financial Goals Periodically
Chapter 6: Tracking Your Financial Planning Progress
Any plan is successful only if there is a way to measure how well you are doing. When it comes to critical matters such as financial goal development, progress tracking is even more important.
It lets you see how far you have come towards achieving the goals that mean happiness and comfort to you in coming years. Good performance provides an incentive to do even better, while poor performance puts pressure on you to ‘get your act together’ well in time.
An evaluation of how well you have done so far should form a part of your periodic review. For effective evaluation and review, you need specific, measurable targets for each of your goals to compare your progress with. This is why when you develop your financial goals, you must pay special attention to the following aspects:
- Be specific about your goals
At the time of setting your goals, make sure you are very specific in describing them so that tracking and evaluation become easy. For example, ‘Buying a home in a good neighborhood’ is a vague goal.
What kind of home do you want to buy and in which neighborhood? How much will it cost? What will be the down payment and how much monthly payment you will have on your mortgage? Without answering these questions, it is impossible to say how far you have come towards achieving this goal because there is no means of quantifying it. - Every goal has a dollar value
Every goal has a dollar value – the amount of money you need to achieve that goal. When you are making your goals, you need to set a specific dollar amount for each of them.
Make sure you adjust for inflation (and appreciation in case of assets), to arrive at a realistic target in dollars. This way, you will always know how much more you need to save before you can realize that goal.
- Periodically review the dollar cost of the goal
Your periodic review must include an overhaul of the dollar cost of each goal, if it becomes necessary. Your goal of owning a house may require $200,000 right now but 10 years from now housing values may be very different. At that point you will need to review the goals and make changes as required in the dollar cost of achieving that goal.
Once you have set your financial goals with these aspects in mind, you can be sure that you have set clear targets for yourself that are possible to achieve. Measuring your performance against these targets is an easy task and it gives a clear and accurate picture of where you stand.
Setting Milestones
You should also break up your goal into smaller, easy to achieve parts by setting milestones. Milestones make it easy to track progress made so far. They also make it easier for you to work towards the goal by taking it one step at a time.
For example, a goal to become debt free can be subdivided into smaller goals with specific milestones in the following way. You can aim at saving $400 every month on your monthly budget to repay your debts or you can set a 3 month target to pay off all credit card dues. You can gauge your progress towards debt reduction simply by measuring your success with each milestone.
Developing financial goals is not a simple task by any means. But the effort and time you put into setting your financial goals pays off when you are able to achieve financial independence, security and happiness. No matter what your age or your earning capacity is, identifying and developing your goals with a rational perspective is critical to your and your family’s future.