Why are you here?
In order to stay the course you need a reason.
Goal setting is the foundation in personal finance. In the harder times you will need to remember what it is you are on the path to achieving. Only by defining what is REALLY important to YOU will you have the motivation to keep going, and not veering off course, over the months and years ahead.
1. what could my goals be?
Everyone's goals are different. The important thing is that they are yours, and possibly your partners, but they are absolutely personal to you. They could be trivial or huge, it doesn't really matter. Obviously the harder the goal, the longer it will take to reach, and if this is the case you may want to consider breaking it down to have something in the interim to help you maintain momentum.
Some possible examples:
~ Pay for our dream wedding
~ A once in a lifetime holiday to the Seychelles
~ A fund for when child hits 18
~ Deposit for a house
~ To pay off the credit card / loan
~ To invest in a 2nd property
You get the picture.
2. How much will I need?
Each goal needs to have a monetary figure attached to it. Otherwise, how will you know what you need and when you're done. Be sure to include EVERYTHING you think you will need. And if you don't know precisely how much you'll need, have a good guess. You need a target!
Building on some of the examples from before:
1. A once in a lifetime holiday to the Seychelles
Flights + accomodation - £2,000pp x family of 4 = £8,000
Spending money, meals, excursions = £2,500
TOTAL = £10,500
2. Deposit for a house
Purchase price = £250,000
25% deposit = £62,500
Solicitors fees and moving costs = £3,000*
TOTAL = £65,500
* Depending on rules at the time and your situation you may also need to factor in other costs such as Stamp Duty and Estate Agent fees.
3. To pay off a credit card / loan
Credit card balance = £10,000
Interest due = £1,000**
TOTAL = £11,000
** This figure will depend on your interest rate and how long it will take you pay off the balance. There are calculators available online that can help you determine this figure, a quick google search is your friend here, like this one : https://www.moneysupermarket.com/credit-cards/calculator/
3. when do I want it by?
You know what you want. You know how much it's going to cost. Now you need decide when do you want it. Be realistic, but you can be aggressive. If you really want something and are prepared for the sacrifice to achieve it you will make it happen.
Furthering the same examples:
1. A once in a lifetime holiday to the Seychelles
TOTAL = £10,500
In 1 years time
2. Deposit for a house
TOTAL = £65,500
In 3 years time
3. To pay off a credit card / loan
TOTAL = £11,000
In 1.5 years time
The more goals you have, the more diluted your funds will be and the longer it will take to reach them.
You will need to decide on the balance that is right for you.
IN SUMMARY
- Write down your goal, whatever it is
- Assign it a value, how much money is it going to take to get it
- When do you want to achieve it by. Give it a realistic but aggressive target
Keep your goals in plain sight. You want to be reminded of them regularly. Write or print them out, put it on your wall in your kitchen, in your office, next to your mirror. Anywhere as long as it is visible to you. Read them a lot, daily if you can.
If you are really focused and are really intentional about reaching them, YOU WILL MAKE IT HAPPEN.
TOOLS AND RESOURCES
As we've said, the way to make your goals real is to write them down!
Some will prefer to do this the old fashioned way by hand on paper - which can work just fine. Others prefer to keep everything electronically. For the more technical folks we've got an Excel template just for you! Just click the link below to download, it's FREE so please help yourself.