If you don’t set financial goals for yourself, then you are very likely to spend your life living paycheck to paycheck and that can be a frightening way to live. The other side of that is living on credit far beyond what you can really afford and being deep in debt, which isn’t good either.

Regardless of your income, you should try to set financial goals for yourself. If you are new to the concept of financial goals, one mistake many people make is setting unreachable goals and then giving up when they fail. So if you are new to the idea of setting financial goals, start small. Things worth having in life are worth working for and sometimes we might need to take a few “practice” runs before going for the real prize. In other words, if you have never set any financial goals, pick something realistic and doable. Depending on your financial situation and income, that can be anything from reducing your debt, to saving for a really great vacation. What I’m trying to say is that if you have never set any financial goals, and on your first time out you think, “I’m going get completely out of debt, save a 25% down payment for a house and buy a new car,” you aren’t likely to meet all those goals, and when you fail, it would be harder to try again.


So using those three examples above, and thinking of the person who has never set a financial goal in their life, start with just one of those things, or you could set one for each of the next three years. But which to choose? Only you can decide that. Becoming debt free would certainly make the other two much easier, but if you have a car that is costing you more than it’s worth and live in an area or have a job which requires a car, then you might want to consider replacing the car first.

So now you have picked your goal, so how do you get started? Let’s say you decided to reduce your debt (or if feasible completely get out of debt). The first thing you need to do is look at your income and expenses and then create a budget for yourself. Most of us find when we look at what we actually spend our money on, there are a lot of things that we really could do without on a regular basis.

Now look at your debt. Is it far beyond your yearly income? Then don’t expect to pay it all off in one year. But being realistic and following a plan can help you significantly reduce your debt within that time frame. Really look at what your debts are. Do you have just a few large debts like a student loan and a car, or do you have lots of little debts, like retail credit cards? Perhaps you have all of the above. Either way, you can still make a big dent in those debts in one year if you have a plan that you follow.

You start with that budget, and figuring out what expenses you can have that you don’t really need. If your debt involved credit cards, you make a vow to yourself that you aren’t going to use them until you get them paid off. Creating more debt while trying to get out of debt is like a hamster in a wheel, he just keeps running, but he never gets anywhere.

No matter what your plan is, when you create your budget, remember to include saving some money. Even if it is only twenty dollars a week, at the end of the year, you will have saved a thousand dollars, and that can certainly help further your goals. Not only that, if some unforeseen emergency comes up, you have something to help you through a tough time.

Even while you are trying to pay down your debt, and put a little away for emergencies, don’t forget about retirement. Take advantage of whatever programs your employer might offer like a 401K plan or pension, and if those aren’t available, start an IRA on your own.

The most important thing about financial planning is setting realistic goals and then being willing to make a few changes to your life to reach those goals.

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