Financial Goals – Key To Make Money

Have you ever ran a marathon that doesn’t have a finish line? A marathon where the runners jog and jog and jog through to eternity? It doesn’t make sense yet that’s what most people do with their finances.

Take, for example, the case of Mary (a friend of mine). In my group of friends, she’s the pessimistic complainer. You know the one – every group has one – always complaining that money is tight because of how the economy is crashing and always talking about the “good old days”. She’s, in fact, the most well-off in our little group.

So one day, I took her aside and asked her how I can help, financially. “What’s your goal?” I asked. Her answer is what I typically see in online forums and social media “more money”. How much more How much more exactly? “I don’t know. Just more.” Then she asked me a question, “Do you have a limit as to how much more you want?”

Is it any wonder that she’s never happy with her financially situation? She’s running a marathon… without a finishing line. Every marathon must have a finishing line – and if you want to run another marathon, you can then set yourself a new finishing line.

This is just one of the reasons why everyone needs a goal: a sense of progress. Here are 4 more reasons why goals are crucial:

1. A good goal lets you see the big picture. To achieve her “non-goal” of making more money, my friend Mary decided to put in more hours in the office. She’s the most hardworking of all but she always want to make the elusive “more money”. Her vision became narrowed: she saw “working more” as the only way to achieve that goal.
2. A good goal keeps your on track. Let’s say you want to retire on a farm someday. What do you need to do to make that seemingly impossible dream happen? For most people, the approach is to “save as much as possible” – which never work because they’d be depriving themselves in the short-term and will soon give up. Next thing you know you’re back to your old pattern and not working towards that long-term goal.
3. A good goal adds to your sense of urgency. “More money?” Yeah, there’s always opportunity to achieve that next year. But what if you need to have $5000 by the end of this year to achieve your long term goal?
4. A good goal gives your feedback. What if you needed $5000 by the end of this year but failed to achieve it? Well, at least you’d know exactly how much more you need to make up for – something you can’t do if your goal is “more money”.

What exactly is a good goal? Well, a good goal consists of 5 parts:

1. A good goal is specific. If you want to buy a farm, you need to know how big will that farm be, where will it be and what do you need it to contain (a lake, perhaps?). You need to know all this so you know exactly how much money you’d need to buy that farm. This is the finishing line.
2. A good goal must be measurable. A lot of people have the goal making more money to live “the life they desire”. What exactly is the life you desire? If you can’t measure it, you can’t make progress toward it. List what has to happen for you to know that the life you want is here: no debt, travel to Burma, live in a luxurious apartment, etc.
3. A good goal must be timely. Do you want $10 million when you’re 95? Yeah, that’s probably too late to enjoy the money. $1 million when you’re 40 is worth to you I’m sure because you can enjoy it. This is why when you set a goal, you need to set a deadline to it to create a sense of urgency.

Once you have your goal, remember that there are more than one way to get to it! Are you short of $500 a month to achieve your ultimate goal? Can you ask for a raise? Can you invest? Can you start a side business? Can you cut your discretionary spending?

And last, you need to prepare for emergencies by setting up an emergency fund. Think of it as insurance for your goals without the premium (plus you are paid interest for it). What if you car break down tomorrow and you have to dig into the savings account meant for your goal?

Many beginners never took the step of setting an emergency fund, thinking it’s the same as a savings account. But when an emergency arises and set back their progress towards a goal,they become frustrated – and often give up altogether. Imagine your goal almost within reach, only to be yanked back from it.