How to Set Financial Goals (Part I)

How to Set Financial Goals (Part I)

Moving has a way of derailing your budget. Well, really, it has a way of pretty much derailing everything: your budget, your daily routine, your weekly Japanese takeout, your… life! And it takes a while to get back on track, but Johnny and I are finally getting there. And one of the keys to getting back on track with our usual budget has been setting goals in our new place.

Budgeting can be hard at times, and goals help us to stay focused. Sometimes I think to myself Why do I keep limiting myself from spending my money on what I want? It’s my money and I’ve worked hard for it. If I want a new wardrobe, I should get it. right. now. But our goals help to quickly quell that storm of irresponsible spending that wants to erupt. Oh yeah! If we stick to the budget this month, we can put away $XXXX (short-term goal). And If we do that for 12 more months, we’ll have enough for a down payment (long-term goal)! Without our goals, it can be hard to justify saving that extra money that we work our tails off to have.

Setting both short-term and long-term goals is fundamental to having success with saving. If Johnny and I only set long-term goals, we would quickly get frustrated and defeated. It’s bad enough that we’re putting money away into 401k’s and IRAs that we won’t see for, oh, 40 years… wait, seriously?! As a new mom who’s still getting the hang of exercising regularly, I’m all too aware of the importance of short-term goals. Currently, my short-term exercise goal is to exercise three days a week. It doesn’t matter what I do or for how long, just as long as I exercise. Each day I write in my planner Exercise? and at the end of the day, I either respond Y or N. It’s about as simple as can be because that’s all I can handle right now. My long-term goal is to run a 10k. But if I thought about doing that each day, and then went out and realized I could only run two miles, you can bet I’d have already given up.

And so it is with finances. Each day we focus on little goals. Don’t go over budget in any categories today. Done. And Johnny and I have weekly budgeting goals, too. Just last week we set a new goal for our weekly food spending. In a given week, our goal is to have one super cheap fast food meal ($8 or less), and one takeout meal ($20 or less), and to otherwise eat homemade. If we can stick to that in a given week, we give each other a handshake. Because that’s not weird. Or maybe we don’t really, but we feel proud of our budgeting efforts. And it helps us meet our monthly food budget.

Having those long-term goals also helps us to remember the big picture so we don’t get stuck in a rut. At the end of the year, per our New Year’s resolutions, we want to add $25k to savings. So even if we get off track one week or one month, we can look at the big picture and feel motivated to continue trying so we can meet our long-term goal. Short-term and long-term goals combined create a viciously wonderful cycle of staying motivated.

So what kind of short-term and long-term financial goals have Johnny and I set? And what are some ideas that help us get started in setting goals? It’s all coming up later this week!

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  • Reply Alice @ Earning My Two Cents September 10, 2013 at 4:18 pm

    So true. I have to look back at my goals to remind myself why we live like this. Just a few nights ago my husband and I were discussing our long term goals like buying a home and discussed how and when we think we will have the money. Right now, we are living on one income while he is in school so saving for a down payment is extremely difficult since we don’t have much extra cash. But what extra we do have is going to meet our short term goals which are saving to travel to England next summer for my sister’s wedding and paying off debt. Each debt we pay off and each transfer to the savings account, even if it’s small, is a victory!

    • Reply Johnny September 17, 2013 at 2:12 am

      Great perspective. And believe you me, we ask ourselves, “WHY ARE WE DOING THIS TO OURSELVES?!?!” on a weekly basis, so you’re not alone. Just keep remembering the big picture — and even the little picture like that awesome getaway wedding in England!

  • Reply Elvin @ Journey To Millions September 10, 2013 at 6:43 pm

    Great cliffhanger! I am excited to read your new goals tomorrow. Anyway, I agree with what you said about moving in. Aside from the change in location, it also disrupt habits, routines and budget. Setting a goal is The best thing to do. It is easy to give in the temptation of day-to-day wants. Having a goal makes us focused and motivated for the things that we really want, in the short and long term.

  • Reply sarah September 10, 2013 at 7:17 pm

    my long term goals are paying off my car loan and my credit card bill. i accrued some credit this summer from not having a job and i am really stressing about the credit card debt. its not a huge debt but its still more than i would like. short term, i would like to pay off a little bit each day (i do this by charging everything and paying it off immediately from my phone-so if i charge a 2.49 for coffee, i pay off 3.00 right away. additionally, i pay 50-100 each month towards my credit card bill. i find that rounding up helps knock down the total balance little by little. i know its not a lot, but every little bit adds up

    • Reply Johnny September 17, 2013 at 2:25 am

      Every little bit definitely adds up. We actually round up in a lot of cases, too. It irks me every time we have a payment of, say, $4.11 and put it down in our budget as $5, but it’s nice to know we’ll have a few bucks left over at to throw into savings, even if we don’t see it.

  • Reply Rob September 10, 2013 at 7:21 pm

    Excellent strategy, guys. And to prove to you that it works, when my wife and I were your ages, (about 4 decades ago) we followed the exact same strategy. Lots of discipline, some sacrifice, both of us working hard as a team to achieve common goals. Today we’re totally debt free, own a nice size car and house, and have significant retirement investments. Life is good. Sadly, in contrast, my younger siblings, both married, with their own families, over the years did not follow this strategy, giving in to temptation and frivolous overspending. Both today are in debt, living paycheck to paycheck. Not good. So karma is alive and well. Just so you know …

    • Reply Johnny September 17, 2013 at 2:29 am

      Which is precisely why we live by the mantra, “What would Rob do?” 🙂 Seriously though, we always enjoy your insights for this very reason — so that we can have the type of financial success you and your family have worked so hard to achieve.

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