Have you ever wondered exactly what you should do with your money? Sure, you know you need to budget and save. But beyond that, you may be lost. After all, there are a ton of factors that affect your financial goals and what you want to achieve with your money.
If you’re looking to gain clarity on your money goals, use these 3 steps to get started.
Ask Yourself: What Do I Want?
When thinking about your financialm goals, begin by asking, “what do I want?” Think big and let your imagination run wild.
Are you interested in being a homeowner? Would you like to have children? Do you want to travel the world? Have you dreamed about quitting your job to start your own business?
There is no right or wrong answer. Just be sure to assess what you want. Not what your family wants for you, nor what your culture expects of you, or what you may feel society demands of you. Your dreams are all your own, so make sure they are coming from the right place.
Once you have come up with a list of what you want, write it down. Next to each “want” put an estimated cost next to it, as well as a timeline. If it helps, draw out a timeline so you can visualize your goals next to each other.
Then look at your estimated cost and estimated time for reaching those goals. Divide the amount of money you need by the amount of months until you reach your goal, to figure out how much money you need to save per month.
Knowing what you want out of life can help inform your financial goals and give them purpose and direction. Saving money can be boring without purpose, but by refining your goals, you will give every dollar a job and know what you want to use that money for.
Assess Your Needs
After creating a list of what you want out of life, start thinking about what you need in your life. While your wants are important parameters in determining your financial goals, your needs are even more important. You can’t reach your wants until your basic needs are covered.
Start by assessing your situation — do you have a sufficient emergency fund of at least three to six months’ worth of expenses saved up? Are you utilizing your employer-sponsored retirement plan and getting a match? (Or taking advantage of something like a Roth IRA if you don’t have a 401(k)?) Do you have rental insurance, health insurance, and other safety measures in place to protect yourself and your finances?
Make sure your financial needs are being met first. If your short, medium, and long-term needs are not being met, you need to take a step back. Look into developing a full, comprehensive financial plan to make sure you can take care of what you need and then what you want.
Look at Your Financial Goals and Make a Plan
The next step to clarify what you want to achieve with your money is to look at your goals and create a plan to reach them. Have a list of your needs and wants in front of you and list them in order of importance.
For example, traveling may be your number one priority for now, but buying a house might be fifth on the list. Or perhaps you are just starting out and need to develop a healthy savings fund.
Once you have everything mapped out, create financial systems that support your needs and wants. You can do this by:
- Maxing out your retirement contributions.
- Looking for ways to increase your income.
- Create targeted savings accounts for all your financial goals. Nickname them something fun.
- Save a percentage of your income for each goal every month.
Create a financial plan that supports your money and life goals. Remember, your goals can change over time, so adjust your plan accordingly. Let your money work for you and your goals.
The most important part is actually knowing what your goals are and creating a plan to reach them. But they should be flexible, just like you. Remember, money is a tool for life, not the other way around.
What are your financial goals, and how are you working toward them?