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The best way to achieve a realistic financial goal starts with planning.

September 6, 2018
The best way to achieve a realistic financial goal starts with planning.
If you had to choose between sitting down at the kitchen table to set financial goals or sitting on the beach in Maui, you would probably choose the beach. But how would you pay for it? Financial goal setting may not be as exciting and fun as a vacation, but it helps you to save for exciting and fun things, as well as things that are not as fun but are still very important - like retirement or sending the kids to college.

The first step in achieving your financial goals is determining what your goals are. For now, just think about the goals themselves and when you want to achieve them - don’t worry about the cost. Do you want to buy a new computer in a year? Have a down payment for a house in four years?

Once you figure out what your goals are, you can then calculate how much you will need and what you should set aside each month. How you do this depends on how much time you need to reach your goal. Short-term goals can be reached in under a year. Mid-term goals take one to five years to achieve and long-term goals are achieved in more than five years. 

Usually for long-term goals, it’s important to consider inflation and the rate of return. How much something will cost in the future and how much you expect to earn on the money you invested or set aside are important factors to consider when planning for bigger expenses like college and retirement. For example, if you put money in a share certificate you will be paid dividends depending on the amount of money you deposit and how long you save it for. If you invest in stocks, the value of the stocks may or may not increase over time, and you may or may not get paid dividends - the risk is much higher and should be considered.  

After you set your savings goals and determine what amount you need to save each month to reach them, figure out if this is realistic. If your savings plan tells you to save $1,500 a month but your income is $1,700 a month, you probably need to make some changes. To make this easier, start by comparing your current income and expenses. You should always have more income than expenses each month to save. If there is not enough money in your budget right now to save, consider if you can make any changes to your income and/or your spending.

Your savings should be the first "bill" you pay each month. But what if you simply can’t put the $150 into your Maui extravaganza fund one month because your transmission blew up? Resist the urge to panic and consider it a temporary setback. With a little extra effort, you may be able to make it up over the next couple of months. Or you may be able to alter your plans or achievement date slightly. However, if you find yourself regularly unable to meet your savings goal, there may be deeper issues to contend with. Revisit your goals and budget and adjust so that they are more achievable.

By taking the time to set your financial goals first, you can go from dreaming to achieving. Here’s a recap of FirstLight Federal Credit Union’s tips to stay on track with savings goals.
  • Make it a family affair. If you share your finances with someone, talk about your goals, compromise where necessary and work together. Let your kids know your goals (especially if you’re planning for something that will benefit them - a vacation, a house with a bigger yard, etc.) and remind them of the goal you set together before you go shopping.
  • Be good to yourself. Make sure you leave a little room in your budget for the occasional treat. Too much sacrifice can be overwhelming and frustrating.
  • Stay motivated. Keep a picture of your goal in your wallet, on your computer, in your car - wherever you need it to stay inspired.
  • Direct deposit. Have the money for your goals automatically directed into your savings each pay period.
  • Be flexible. Expect the occasional setback and be willing to make changes when necessary.
  • Seek help. Know there are experts who can help you decide how and where to invest, how to create a money management plan and more.
  • Build a support system. If you’re changing spending habits, let people close to you know so they can help. 
  • Review your budget. As time goes by, your financial life will change. Debts get paid off, new expenses arise... keep track of your budget throughout the process and adjust as needed.
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