Are you meeting your savings goals? Or do you need to figure out how to set financial goals?
Most of us are somewhere in the middle. There’s no magic amount of money to have in your savings account. After all, there are a lot of factors going into how much you can save – income, cost of living, student loans.
When you’re early on in your career, it’s more important to have defined financial goals that you’re working towards. If you don’t have a goal, it’ll be easier to spend indiscriminately, since there are no defined consequences. So if you’re unhappy with how much you’re saving, it’s time to get serious about setting financial goals. Here is some help to you get started:
Set SMART financial goals
Have you heard of SMART goals? The acronym became popular in the 1980s specifically to improve management goal setting, but they’re a great way to set a variety of goals. SMART stands for Specific, Measurable, Achievable, Relevant and Time-Related. Let’s apply those criteria to financial goals:
First off, you have to think about what you want your goal to be. Seems like a no-brainer, right? But if your goal is too vague, it’ll be hard to figure out when you’ve met your goal, and even harder to stick to it. Here are a couple of examples of Specific goals:
–Save 10% of my income each month
–Spend less than £50 on lunches out each week
–Save enough for a down payment on a house
While simple, each of these goals have a clear purpose and outcome – and they’ll still lead to you saving more and spending less!
How do you know if you’re meeting your goal? You have to be able to measure it. This goes beyond just knowing when your goal is completed – you also need to track your progress along the way.
If your goal was specific enough, you probably won’t have to adjust the goal itself, you’ll just need to plan out how you’re going to track progress. For example, if you’re trying to save £1,000, measuring success is pretty clear-cut: once you have £1,000 in your savings account, you’ve met your goal.
The easiest way to guarantee you’ll fail at keeping your goal? Setting yourself up to fail. Saving £70,000 in a year is impossible if you only make £30,000. While that might be extreme, other goals might not be achievable for you. Take saving 10% of your monthly income. This is a great goal, but when you’re just starting out, an entry-level income might only cover your basic expenses and loans, with not enough left over to save a full 10%.
While defining your goals, you need to take a second to think about why you’re making the goal in the first place. What are you trying to achieve overall? It might not make a lot of sense to be saving for a down payment if you’re not planning to buy a house for another 10 years. Focus on making sure your goals are relevant to your plans.
Lastly, you need to make sure your goal has a start and end date. The timing should also be relevant and achievable, but without a timeframe to stick to you’ll have a hard time being successful.
Setting financial goals may feel aspirational, but if you set the right goals you’ll be able to see them through.