Grow Your Savings: 3 Steps to Setting Financial Goals

 

“A goal without a plan is just a wish.”

This is one of my favourite sayings, mostly because it holds the secret to making your wishes come true: having a plan! The plan doesn’t have to be complicatedin fact it can be just a sentence or 2. The purpose of the plan is to point you in the right direction, and inspire you to start taking action.  

There are 3 things that differentiate a financial wish from a financial goal: a number, a date, and an action. Ready to turn your wishes into goals, and your goals into reality? Follow the 3 steps below:

 

Step 1: Know the number

Vague goals like “save for a trip” or “save for retirement” are difficult to reach because you haven’t given yourself a clear target to aim for. This first step requires you to estimate how much money you need to reach your goal. Some goals, like a trip, are easier to estimate with a bit of Googling. Other goals, like retirement, are more complex to calculate. If you can’t figure out what the appropriate amount is, you can get started by estimating the amount you’d like to save each week, month or year.

 

Step 2: Set a date

The second step to making a clear, specific goal is to associate a date or deadline with it. When creating your savings goals, I suggest beginning with 2 or 3 goals of varying timelines. For example, a short-term 90-day goal, a mid-term 3-5-year goal, and a long term 5+ year goal.

You can break down 1 savings goals into these different time frames (see Example 1), or you can set different goals for different time frames (see Example 2).

 

Example 1

I will save $500 for retirement in the next 90 days, $10,000 in the next 5 years, and $500,000 by the time I am 50.

 

Example 2

I will save $500 towards a vacation in the next 90 days, $10,000 for a down payment in the next 5 years, and $500,000 for retirement by the time I am 50.

 

Step 3: Commit to an action

While the statements above are much closer to being goals than wishes, they are missing the last key component: taking action! Make sure to commit to a clear action that you will take to achieve your goals. For example, in order to save $500 in the next 90 days, you will need to save around $40 each week. Perhaps you could set up an automated transfer of $40 to your savings account each week, or start bringing your lunch to work and put the money you save towards your goal.

Now consider your long-term retirement goal. Your commitment could be booking an appointment with a financial planner to calculate a more precise plan to reach your savings goal.

Do you see the difference between a wish and a goal?

A financial wish is to “save for a trip.”

A financial goal is to “save $500 towards a beach holiday vacation within the next 90 days by bringing my lunch to work and transferring $40 into my savings account each week.”

If you’d like some help turning your financial wishes into goals, reach out anytime!

 

 

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