Whether you’re learning the basics of personal finance or are an experienced budget spreadsheet master, personal finance can often feel like a daunting task. Not only are you grinding 8+ hours a day at your job to earn the money necessary to build the life you want, but then you have to spend your “after hours” energy figuring out how to budget for living expenses, savings, family trips, and that occasional night out. Fortunately, we’ve talked at length about how to effectively budget and begin investing to help guide this strenuous process. However, with rising costs across the board due to inflation and a shaky economic environment, it’s hard to remain positive about personal finances when you see your bank account shrinking faster and faster.
One thing that has helped us stay positive about our finances is setting financial goals and regularly tracking progress.
What to do about financial stress?
This financial stress is something most people are feeling and unfortunately is an emotion we are all going to have to master to weather the inflationary storm. There are a lot of great outlets to relieve stress and anxiety. For some people, that relief comes with exercise. For others, it’s reading a book that transports you to a far away land. One thing that has helped us stay positive about our finances is setting financial goals and regularly tracking progress.
Let’s talk about goals
The power of goals?
Goal setting has been highly researched and proven to not only increase accountability but the sense of control and satisfaction in one’s life. In my life, I know if I don’t set goals for myself, I feel unfocused and constantly question my decisions. Am I focusing on the right tasks at work? Am I balancing my work-life focus in a way that allows me to live the life I want? Having goals allows me to focus my energy on the things most important in my life. This applies equally to personal finance.
How to set goals?
Believe it or not, there is a proper way to set effective goals. In this article, the idea of SMART goals is discussed. Based on research, it argues that all goals should be Specific, Measurable, Attainable, Realistic, and Timebound. By utilizing this approach, you can feel confident that your goals can be accomplished and will be a motivating force in your decision making.
A good example of a SMART goal is: I want to pay off my $20,000 student loans by January 2023 and will do so by saving an extra $500 per month. This is a smart goal because it specifically outlines a measurable goal, sets timing to accomplish it, and is attainable given my specific financial situation.
How to apply goals to your personal finances?
The SMART goal approach can be used across all aspects of your life, whether it be dieting, athletics, relationships, and so on. As it relates to finances, these can be a great motivator in holding you accountable to your budgets.
In our lives, we’ve set a few key goals that help ground and motivate us. These financial goals are: 1) A five year net worth goal, 2) pay off all student loans by the end of December 2022, 3) and buy a new car by March 2023. All of these goals have specific dollar values tied to them, but those are a bit personal to us. You’ll notice these are all very specific and time bound, and based on our current financial situation, we feel are attainable.
Stretch your comfort zone
While SMART goals need to be realistic and attainable, I believe they still should stretch you and challenge you to work hard to reach them. Our three key goals outlined above required us to take a deep look at our finances, develop a budgeting strategy, and drastically adjust the way we were using our money. However, each of those goals are life-changing in their own ways and our progress towards accomplishing them has been extremely rewarding.
Have a way to track financial goals progress
The ability to track progress against your goals is essential as a motivating influence. Depending on your goals, you can do this in your DIY spreadsheets or just by tracking your bank account balances. For our net worth goal, we use Intuit’s Mint to track all of our assets and liabilities, which provides us a live look at our fluctuating net worth. Every time we get a big pay day or are frugal with our expenses, it’s so rewarding to see our net worth rise.
Check out additional topics to make personal finance SLIGHTLY EDUCATIONAL on our Personal Finance page.
