Welcome to Day 19 of the 30-Day Financial Wellness Challenge.
Each day will comprise of financial exercises, some short and others a bit longer, to help you become financially fit. The goal is to tackle different aspects of personal finances one day at a time.
After the 30 days, you’ll have a stronger understanding of your financial health and an action plan to improve your financial wellbeing. Review Day 18: Mission and Strategy
In Phase 3, we are addressing the following areas:
|Vision||Sets your direction.||What is your future life like?|
|Values||Categorizes what’s important.||What are your priorities?|
|Mission||Plans to achieve your vision.||What are your life goals?|
|Goals||Goals supporting your mission.||What are your financial goals?|
On Day 19, it’s all about goals.
After two-and-half weeks in the challenge, you probably have a list of objectives. An objective is vague like “I want to get out of debt” or “I want to save for retirement.” Today, I want to share what turns objectives into actionable goals. A goal is the desired result you envision, commit, plan and achieve.
What are SMART financial goals?
Financial goals should have a definite outcome and deadline and be within reach, based upon personal income and assets. You should be able to easily do the math and calculate how much money is needed and what steps you’ll need to take to make it happen.
You can set better goals by following the SMART principles. SMART is an acronym for Specific, Measurable, Achievable (or Actionable), Realistic (or Relevant), and Time-Related (or Time-Bound).
|Specific||Specific goals have a much greater chance of being reached. A goal may be to buy a house. But a specific goal would be to save for a downpayment.|
What do you want to accomplish?
|Measurable||Measurable goals track your progress and help you stay motivated.|
How much do you need?
|Achievable||Achievable goal is what resources you need.|
How can you accomplish this goal?
|Realistic||Realistic goal focuses on what you can control and identify opportunities.|
What will and can you do?
|Time-bound||Timely goals need a target date or deadline to focus on.|
When do you want it?
The more specific a financial goal, the easier it is to determine how much money is required. Goals provide a framework for money decisions and help focus your efforts.
Examples of financial goals include:
- Eliminate credit card debt
- Pay off student loans
- Save for retirement
- Have an emergency fund
- Downpayment for a home
- Save for a vacation
- Save for a car
Other financially related goals include:
- Improve credit score
- Increase income
- Live below means
- Lower expenses
How do you set a financial goal?
Write the goal down by answering the questions who, what, when, where, and why.
Since this is your goal, begin your goal statement with “I will…”, then state exactly what you want to accomplish.
You can create a goal statement with details and specific dates. For example, “By the year 2023, I will have the $20,000 I need for the down payment on a home.”
Mission: Debt Freedom
Strategy: Pay off unsecured debt first
Goal Statement: In 12 months, I will pay off my $5,250 balance credit card.
|Specific||Paid off bank credit card|
|Measurable||$5,250.00 in total debt with bank credit card|
|Achievable||$437.50 / month payment needed|
|Realistic||Need an additional $200 per month to pay in addition to the minimum monthly payment|
|Time-bound||Paid off in 12 Months|
Mission: Live Better
Strategy: Emergency savings strategy
Goal Statement: After 10 months, I will save money $1000 to cover an unexpected expense.
|Specific||Savings for a rainy day|
|Achievable||$50.00 / paycheck needed|
|Realistic||Auto transfer $50 per paycheck into rainy day fund|
|Timely||In 10 months|
Mission: Live Better
Strategy: Own a home
Goal Statement: By 2023, I will $20,000 saved for a down payment on a home.
|Specific||A home down payment|
|Achievable||$555.55 / month saved into a home downpayment savings account|
|Realistic||$277.80 per paycheck saved automatically|
|Timely||In 36 months|
Why financial goals matter?
Having financial goals can help you achieve your mission and move forward in your vision. Financial goals influence the actions you take today. For example, your goal is to pay off a credit card debt. You’ve set a plan to make extra payments but also realize you need to cut back expenses and use the extra money towards the debt. Without a clear goal, you’re more likely to continue spending as usual making it more difficult to achieve your mission.
Now, it’s your turn to create SMART goals.
Day 19 Assignment
- Choose a mission and strategy from Day 18.
- Create one goal related to the mission.
When you identify financial goals, you’re then able to include the goal into a budget. A budget is a spending plan that helps you allocate your money accordingly. After identifying goals, creating a plan, tracking progress can motivate you to keep going.
Financial Goal Setting Tips
- Revisit your financial health checkup to identify potential goals.
- Create as many goals as necessary to achieve your mission.
- Determine what tactics you’ll need to reach them. Tactics include things like automating deposits, earning extra cash through side hustle, consolidating multiple credit cards, etc.
- Get a copy of my book, You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life. Learn more about having a vision, clarifying your values, and following a money philosophy.
- Personal Capital is a free personal finance app with a 360-degree view of your money. With Personal Capital, you can see all your accounts in one place with planning and analysis tools.
Next Daily Challenge: Day 20: Save More with the Purposeful Savings Plan