The journey of financial empowerment is a worthwhile pursuit and adventure, and an essential step towards achieving the life you’ve always dreamed of. Whether your aspirations include traveling the world, starting a new business, or simply ensuring a secure future, developing strong financial goals is an essential key to your success. While growth experiences can be exciting to pursue, determining the financial goals that will best support your ambitions can oftentimes be less straightforward, and even overwhelming. So, let’s get a few things clear before we really dive in.
Have you ever gone to the airport, walked up to the ticket agent and told them to book a flight for you to a random destination? It could be fun and adventurous, yet it might not be for everyone, or the timing may not be right. You may end up in a place where there is unexpected unrest or there is an unanticipated turn of events that requires you to become an adaptive problem solver.
Most of us plan out our travels before we go to the airport. We know the location, what the weather will be like, what to pack, how to be prepared and what we want to see and do. Having that ticket booked before you step foot in the airport is similar to setting intentions and goals in order to achieve bigger ambitions. Thus, preparing a roadmap before taking on your goals can help you strategize effectively and can minimize potential risks that can impact your experience negatively. Going through the goal-setting process can provide the clarity you need to transform your future, one strong and achievable financial goal at a time. “Setting goals is the first step in turning the invisible into the visible.”
Assessing Your Current Financial Situation
Before you begin any journey, you need to figure out where you are starting from. This will provide ease in navigating where you want to go. Imagine you’re at the airport, but you have no idea which gate your flight is departing from. Are you going to end up in the duty-free shop buying things you really don’t need, spending more money than you planned? The same goes for your finances. Without laying out your plan ahead of time it is easy to get off track. Having a clear picture of where you are presently can orient you in the direction you really want to go.
There are 5 major areas that we will want to review when it comes to your finances. Your income, expenses, savings, investments and debts. Begin by thoroughly reviewing these areas. If you want to learn more about developing a risk management strategy, I cover this topic in greater detail in another blog post.
When reviewing those five financial areas, you want to take note of where your strengths and weaknesses lie. For example, you may have a stable income and a robust savings account, yet have high credit card balances and no investments.
Defining Your Financial Goals
Now that we know where you are, we can start getting into your financial goals. I would first brainstorm some intentions that you may want to set around your finances in each of the five financial areas: income, expenses, savings, investments and debts.
Is your income where you want it to be? Is your spending aligned with where you want to go? Are you saving anything? Are you curious about investments? Do you want to pay off some debts? What do you want money to be able to help you do? We all have dreams and an idea of what we want our life to look like, and money is usually a part of the equation.
Do you have some general ideas on where you want to go? Let’s take those ideas and make them into goals using the CREATE method. CREATE goals are like SMART goals with a Create Joy twist. This approach helps you set clear and doable expectations.
C is for Conscious (Specific to you and your experiences)
Your goal(s) must be clear and specific to you and your experiences. They reflect what you want and what brought you to where you are today. A conscious goal answers questions like:
- What is important to me?
- What do I want to do?
- How do I want my resources used?
- What is the purpose of the financial goal(s) for?
R is for Realistic (Relevant)
Your goals align with the larger picture of your finances. Is this important to you? How will you stay focused and on track, minimally straying from the main goal?
E is for Evaluative (Measurable)
When you quantify a goal, especially when it comes to finances, you are able to track your progress easier. How will you reward yourself when you have reached the goal? Or, is the reward in simply hitting the mark?
A is for Actionable (Achievable)
Here is where you want to be even more honest with yourself and be mindful of your current situation. Ask yourself: Is this something you can take action on? Recognize potential barriers, mindsets, or factors that may be discouraging to you? How have you been about working on goals in the past?
T is for Timely (Time Bound)
To properly measure success you must frame out your timeline, including milestones and deadlines. Ask yourself: When will I achieve this goal? Are there smaller benchmarks along the way?
E is for Exciting
It can be thrilling to put action toward a goal, enthusiasm carries you a long way and reinforces your commitment. Ask yourself: Does/Will this create joy for me?
Goals come in all shapes and sizes, and can require different levels of commitment and amounts of time. Define goals based on the timeframe needed to achieve them,
- Short-term goals (under 3 years) might include saving for a vacation or paying off a small debt.
- Medium-term goals(3-7 years) could involve saving for a down payment on a house or funding further education.
- Long-term goals (over 7 years) often focus on retirement savings or substantial investments.
It also may help to break down a specific larger goal into short, medium and long-term action steps.
Setting Specific Financial Goals
Now that you understand where you are and the individual attributes goals can have, it is now time to set them. What is important to note here is that you will want to:
- Define the goal based on the CREATE method
- Determine the financial areas that are impacted with this goal
- Figure out the timeline (is this a short, medium, or long term)
- Calculate the target amount
- Breakdown into actionable steps
We will go through a sample to give you an idea. Let’s say you want to build an emergency savings fund. Here are the steps I recommend taking:
- Define the Goal: Aim to save $15K in my emergency fund in the next 3 years so I have a safety net
- Determine the Financial Area(s): Savings, expenses and income
- Determine the Timeline: Medium term 3 years
- Calculate the Target Amount: Typically, 3-6 months of living expenses
- Outline the Action Steps: Evaluate spending, spend less on dining out, automate monthly savings to build the fund, evaluate spending again, spend less on entertainment, increase monthly amount if possible, celebrate once achieved
Other examples can be paying off credit card debt, or saving for a down payment, investing for retirement, saving for an international trip or funding education expenses.
Creating a Detailed Financial Plan
To unify your financial goals and ensure they work together harmoniously, a detailed financial plan is essential. This plan will vary from person to person, as it should. A financial plan outlines and documents short, medium, and long-term goals, along with strategies to achieve them. A comprehensive financial plan can also include the following:
- Net worth statement
- Budget and cash flow planning
- Debt management plan
- Retirement plan
- Emergency funds
- Insurance coverage
- Estate plan
These can be items that take time and some info gathering to put together. Don’t fret or think you need them all right now. Dealing with finances can become overwhelming quickly and if it does, just focus on some of the more accessible goals you created and come back to this list at a later date when you gain more confidence and knowledge around these assets and items.
Implementing and Maintaining Your Plan
Now is the time to make things happen! Take those goals and the financial plan you have prepared, and organize your action steps. Break them down even smaller, if needed. The more doable those action steps are, the more likely you are to take action and the more likely you will be to see some of the fruits of your labor. If you feel yourself resisting, break those steps down even more, and remind yourself of your commitment to finding the joy and excitement in this experience and the reward you will be met with in the end!
Developing a cadence of when you are going to take these steps, and checking in on your progress, will help keep that time aspect alive and well. And don’t forget to celebrate those small wins along the way. Saying you want something, going after it and seeing it happen deserves a celebration! It helps to reinforce that behavior more and more. If needed, set up rewards for each goal so you have something to look forward to.
Also, the benefits of following the processes I’ve outlined above are that you can measure them and can visually see the progress of your financial goals. Seeing your debt go down, your vacation savings go up, and spending less in other areas is both tangible and fulfilling! Track your progress.
It’s important to note that things don’t usually go as planned, progress is not linear, especially when it comes to money. There will be setbacks, things out of your control, global economy factors, and other challenges that will come along the way. Looking at your goals and financial plan will help you stay the course and adjust as needed. Set the time to do this to keep you motivated and know where you are with your goals. You may even need to adjust them if certain factors change and as you make new goals with life changes.
Another thing that helps when you are going through this process is setting up an accountability contract with someone you know and trust. Some people just need that extra push and motivation, and knowing you have support from someone you know and trust when needed can be super helpful, especially when goals feel challenging. That accountability can be you and another friend meeting on a monthly basis and checking in with each other about your progress or challenges. Or, it can be as simple as disclosing your goals to certain family members or friends that you trust, so they can encourage you to take action.
Sometimes you may need professional accountability when it comes to financial goals. Make sure you work with someone that is a subject matter expert in the area you are seeking extra guidance with.
Unlocking the Power of Financial Goal-Setting
One of the most powerful things you can do regarding your finances is to determine your goals and to follow these steps. Taking the step of writing down your goals, increases your chances of achieving them. Almost 42%!
Most of the time we set goals so we can achieve them. However, what also happens when we take consistent action of our goals is that we actually develop healthy financial habits. One of my ultimate favorite books is Atomic Habits by James Clear, where the author shares this insight, “Goals are good for setting a direction but systems are best for making progress. You do not rise to the level of your goals. You fall to the level of your systems.”
When we identify clear goals using the CREATE method, when we have a financial plan and strategy that we can confidently implement and consistently take action (refining as needed), we reap the benefits of achieving the life we have always dreamed of. The roadmap to your success and achievements becomes that much more clear.
Achieving financial success is possible with the right plan that works for you, and all that you need to do is take the first step of creating that first goal. I know you can do this. Let’s go!
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