What should your goals cover?
Many people set their financial goals as purely a savings and investing goal or target. I think this does only half the job. I think to set proper financial goals you need to think about everything in your life which relates to money and then set your goals according to this.
Your goals should therefore cover
- This is that amount which you put away for a 'rainy day' or money for which you may need in the short term (e.g. for a holiday or big purchases)
- This is money that you are putting away for the medium to long term. This money can have a goal (e.g. a deposit for your home) or be for some future unknown purpose (e.g. retirement)
- You should think about setting goals for amounts that you want to spend on ordinary day to day living - this should include things like rent, utilities, entertainment, clothing etc
- You should also include those big expenditure items that you want to spend on during the year. For example in 2013 I know I want to upgrade my car to an older model sports car and go on a holiday to South America - and so I have to set aside money for this.
Be realistic and leave some fat to be wrong
One of the most annoying things about setting financial goals is how often we fall behind on them. This ends up demoralising us and we often lose track of our goals for the year. When you set your goals try and be as realistic as possible - and then leave some fat for you to be wrong. That is - if you are going to err to one side - make it to under-estimating how much you can save and invest and overestimating how much you will spend on personal expenditure.
If you beat these targets you will feel much better about your goals and targets.
Set up a way of tracking your goals
There are plenty of easy ways of tracking your expenditure goals. I have an excel spreadsheet which I update every month which then gives me my performance in both detailed and summary formats (which I then post on this blog).
Having an easy file to update allows you to see how you are going and you can put as much or as little detail as you like. I'm currently building a fairly detailed one which I hope to upload so that you can download it and use it if you like.
Always keep in mind that your goals should not dictate your life
This goes back to the realism point above. You want to be able to stick with these goals for a full year - you do not want to resent them or for them to stop you doing anything that you truly want to do. What they provide is a foundation for making your decisions and quite often it will also stop those impulse buys that so many of us seem to get caught by.
What are your goals? Do you tend to stick to them or let them go?
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