The purpose behind budgeting is to organize your personal finances so you can achieve something.
Without tangible goals to work towards, you have no incentive to stay on budget. Goals allow you to see how you are doing and applaud yourself when you are successful.
If you know you are saving for a down payment on a new house or you are trying to pay off your credit card debt within say 5 years, you have a target to work towards. You have a goal.
Setting the right goals starts with admitting what your top money problems might be.
- You spend more than you make.
- You have too much debt.
- You don’t save enough.
Knowing which problem (or problems) you want to tackle first can help you prioritize your goals. If for example you are spending more money than you make there is no way you are going to be able to get out of debt or save money. You first priority will be to get your spending under control. Once you do that, you can tackle the remaining reasons for creating a budget in the first place.
Setting Your Personal Goals
It is important to set specific, achievable goals that can help you eliminate your specific money problems. Think about your priorities then use these tips for creating your budgeting goals:
- Write them down. You are more likely to remain committed to goals you record on paper, than loose goals in your head.
- Make them challenging, but be sure you are willing to stick with whatever you’ve set.
- Be specific. Include dollar amounts, time periods, targets. Goals that have details can be tracked and measured.
- Include both long- and short-term goals. Break bigger goals into smaller step by step goals so you can have a sense of achievement. In the short term, you might want to save for a vacation for next year, cut your food bill by $75 a month or bring all your bill payments current. Longer term goals will include paying off your credit card debt, starting a rainy day fund or saving for your retirement.
- Do Some Research. If you are trying to determine how much money you will need to retire by a certain age, talk to a financial advisor or use an online retirement calculator. If you are trying to prioritize your debt repayment, try our online debt calculator tool. If your debts are overwhelming, talk to a debt expert about your options.
- Get The Whole Family Involved. Hold a family meeting to talk about why you need to make a budget and develop your goals with everyone’s needs in mind. If you build your budget together, you are all more likely to want it to work.
Our final piece of advice is to revisit your goals periodically, at least once a year. Things change. Your family income might change. Assess whether or not you are meeting your goals. If not, ask yourself why and what you can do about it – adjust your expectations or revisit your budget. Life is never cast in stone, and your goals shouldn’t be either.
For more advice on how to set goals and develop a budget that can help you address your money problems, download our free budgeting e-book today.