5 Reasons You Should Create Financial Goals
We pulled up to the brick house with thick white columns and waited for my shoot to start. I was eighteen and he was nineteen and we loved doing everything together. Still do. Isaac has been part of this business from the beginning and I love looking back and seeing just how much things have changed. A lot of you probably don't know just how big of a roll Isaac plays in this business. He is involved in all of the crazy ideas, product development, and he is my second shooter. He helps me stay focused on what matters and encourages me to press on. I'm excited to have him sharing his thoughts on financial goals on the blog today.
Like most of you, my wife and I are constantly looking for ways to make our money last longer. For the first part of our marriage, this sometimes looked like a monthly battle between us and our bills. This was a battle we could win (most of the time) except that there were always more than two sides. Because as everyone who has ever tried to do a budget knows, the only certainty about your monthly expenses is that there will be a few you didn’t expect. Every month it’s something. One month it’s the microwave going out, one month it’s car maintenance, and another it’s something else. Add to that the large expenses for things you want but don’t need (wouldn’t it be nice if we had a washing machine that didn’t sound quite like that) and any debt payments you are dying to get rid of…and your financial plate can get full (and your bank account empty) really fast. When this happens month after month, it can be enough to drive you crazy.
Fortunately for me, my brilliant wife came up with a great solution—setting financial goals. The idea is simple: make a list of all the big items you know you are going to need or want to buy. Rank these items by order of importance. Then, set aside a portion of your income each month to save for these goals. When you have enough saved for the first goal, you do it! Then, pat yourself on the back and move on to the next one.
Like I said, the idea is simple, but it can have a powerful impact on your finances, and, by extension, your stress level. Jordan is going to apply this idea on the blog to business finances soon, but in the meantime, here are five reasons you should start making financial goals TODAY!
#1: It will keep you from getting into credit card debt
We could go into the kazillion reasons why you don’t want more credit card debt, but if you’ve ever had it (like me) you know you don’t want it. It’s expensive, and if you have very much at all it takes forever to pay off.
So how do financial goals help? Simple. Your first financial goal is to build up an emergency fund. When something urgent comes up (strangely quiet fridge, doctor’s bill, has-that-always-leaked home repair, record-high electric bill, miscellaneous car nonsense, etc.) you can pay for it out of this fund without going into debt. It’s not a very fun first goal, but you’ll thank yourself for it later.
#2: It helps you do what’s important
Prioritizing goals helps you decide what is really important to spend your hard-earned money on. Having financial goals helps you decide upfront whether you prefer to buy a new couch or a television. On a related note, having all your goals laid out in front of you may help you see that just because a TV is on sale doesn’t mean you suddenly need it more than the dishwasher you’ve been saving for for three months.
#3: It keeps your expectations realistic
Don’t get me wrong, it’s good to be ambitions with your goals. But, I sometimes like to tell myself things like, “this month, I’m going to buy lawn furniture and a large appliance and pay off lots of debt” without really thinking about what that would cost. Sometimes that may work out, but frequently, having those expectations without considering the cost makes me really disappointed when I don’t meet them.
One of the great things about having a specific list of financial goals is that I know how much each one costs me. So, if I know that I can set aside a certain amount of money that month for goals, I don’t wind up being disappointed by not meeting crazy expectations. In other words, my financial goals keep me honest with myself about what I can actually get done.
#4: It reminds you why you’re saving
Money has a tendency to ignite its container, particularly when that container is your pocket.
Seriously though, nothing makes a new car sound more appealing than having enough money saved for the down-payment. Nothing makes a new suit look better in the window than having enough money to walk in and buy it. But, if I have a list of financial goals, I know that I haven’t been saving for a car or a suit, I have been saving to pay off my credit card (or whatever). Having a list of goals that my wife and I have committed to addressing in a set order helps us to protect the money that we have worked so hard to save.
#5: It lets you know when you’ve earned a reward
Most of the goals I’ve mentioned today have been things you might rather not buy. No one likes to spend money on repairs or doctors or credit card debt. But that’s not all financial goals help you save for. I saved money for my wife’s birthday this year using a financial goal. Having it as a goal helped me get her a way nicer gift than I otherwise would have been able to. Vacations, stuff for hobbies, or non-essential home furnishings (like the TV we talked about before) fit into this category too. Have you always wanted to go Europe or have an X-box or see so-and-so in concert? Make it a financial goal! Figure out where it goes on the priority list and, when it’s time, start saving! Putting it in its place on the list makes sure you don’t only spend money on this stuff, but it also helps you feel good about a for-fun expense when it’s time.
This process of goal setting has made a huge difference in what my wife and I have been able to accomplish financially. Try it, and you’ll see that it can make a big difference for you and your family too.