Financial goals are important for people to have, as it helps them gauge a lot of things - like when they can afford to retire, for example. A big problem I’ve noticed is that many people don’t know how to set good financial goals, and many people don’t know how to properly track their progress once they do set their goals. I’ll briefly attempt to tackle this problem, with a few things that have worked for me.

One of the hardest parts of setting goals is, well, setting them. I know it sounds a bit obvious, and it is; unfortunately, it doesn’t make it any easier.When I started setting my financial goals, I realized that the hardest thing was figuring out where I wanted to be, and when I wanted to be there. I had to take many different factors into consideration, including how I was going to accomplish my goals. I have a long-term goal of retiring by the age of 45, but in order to do that I need to achieve a lot of smaller financial goals. Saying that I wanted to be retired by 45 wasn’t enough just by itself; in order to make that goal actually mean something, actually feel attainable, I needed to make smaller goals, or benchmarks, to help accomplish that.

Figuring out what is attainable depends on your own personal lifestyle and income, among other things. I live a fairly frugal life; as a general rule, I don’t spend money on something unless I genuinely need it. Somebody who lives a different lifestyle than me - somebody who lives in a nicer apartment or house, somebody who drives a nicer car, or has ‘nicer stuff’ than I do, will likely not have the same type of goals I do. For somebody who ’splurges’ on these types of things, retirement at 45 may be unattainable.

Making smaller goals is essential to accomplish your bigger goals. So you want to be able to purchase a house in 5 years? Depending on your current situation, you may need to make other goals; develop a more vigorous savings plan for a down payment, clean up your credit and remove as many debts as possible, etc. Something I do before I set goals is to estimate how much it will take to achieve my goal. If I want to be able to purchase a house in four years, after I have found a job and generally know where I’m going to be living, I need to figure out what kind of a budget I’ll need, then how much I need to save each year up until then.

Smaller goals also make the bigger goal seem less daunting. If I were to make a goal of buying a house in 5 years, but didn’t have smaller goals to help me work my way toward it, I may get sidetracked and discouraged. By making small goals, like checkpoints for along the way, I’m helping my overall cause by tracking my progress and also am encouraging myself by accomplishing other goals along the way. The final result doesn’t seem as difficult when it’s broken up into smaller parts. These smaller parts also help keep me on track and let me make any adjustments if necessary; if I find that I’m not saving enough money, I can make a conscious effort to cut down my expenses or increase my income somehow in order to get back up to speed. If I’m cruising along much quicker than expected, I can either continue the cruise, the the ‘extra’ money away/invest it in something else, or maybe splurge just a little if I think it’s something I’ll be able to realistically cope with.

Goals also need to be challenging. For me, buying a house in four years seems like a very difficult task. I’ve still got two more years of college, and my expenses after college will go up considerably. My income will rise as well, but these may not be proportionate. By giving myself something that I really need to work for in order to achieve, it makes that final result feel much better. I know that I’ve accomplished something that actually required a change in me, a constant commitment.

Commitment is another thing that can make or break goals. I’ve got a list of goals that I’d like to accomplish, and I have this list tacked to my wall in two different locations. When I started these goals a month and a half ago, I looked at them every day just to remind myself of what I wanted to do, and how I wanted to do it. Now that I’m a month and a half in, I don’t feel the need to look at them every day. Trent over at The Simple Dollar made a great point about his personal finance management - he related it to training wheels. My sheet of goals has turned into just training wheels. I know what I have to do now to reach my goals, but I can always put my training wheels back on - look at my goals - if I need a bit of extra help remembering. By ingraining this into my daily routine, I don’t even think about these things anymore. What was a chore at the beginning of the year is now scheduled into my day, is so solidly with me that I have a hard time doing otherwise.

Measuring your progress is a crucial part of reaching your financial goals, but more important than measuring your progress is how you handle your progress if you aren’t where you really want to be. It’s easy to get discouraged, it’s easy to become pessimistic about your financial goals. It’s easy to become pessimistic about money in general - I can’t even begin to describe to you how many people don’t want to talk about finances for one reason or another - they don’t understand it, or they’re struggling financially, or think that talking about finances is bad. By shutting out financial discussions, these people are basically condemning themselves to 45 years of working 9 - 5 five days a week. They’re extending the amount of time they have to spend working a job they probably want to leave early, just by neglecting discussion of how they can better their situation. Goals work the same way. If you get down about failures you make along the way, it’s important to keep on trudging along no matter what. There are some goals that I’ve made for the year ahead that I know I will likely not accomplish; but instead of looking the other way and ignoring them, I am taking action to rectify the situation or at least get a plan in motion for how I can fix it next year. Pessimism, as cliche as it sounds, kills dreams. By keeping a positive attitude, you won’t lose sight of the final result and you’ll do what needs to be done to get there.

When you finally do reach your financial goals, you should reward yourself somehow. For me wanting to buy a house of my own, that is reward enough; having the sense of pride that homeowners have. Some people might want to take a vacation, buy a new TV, or just take a few days off work to relax. Whatever it is that will make you strive more for your financial goal, make it done - you’ll find that you are more likely to work harder toward reaching that point. Setting up checkpoints - or smaller goals - along the way can be a great way of rewarding yourself for your progress so far. Whatever happens, just make sure you keep your eyes on the final goal you’ve set for yourself, and as long as you work toward that goal you have a good shot at reaching it, maybe before you had planned.

101 Goals in 1001 Days is a concept I gathered The Simple Dollar, another Finance blog I read. The concept, however, certainly isn’t new and wasn’t even made up by him. I did a bit more searching, and decided to just do some copy/paste work to describe how it works in a nutshell.

The Mission:
Complete 101 preset tasks in a period of 1001 days.

The Criteria:
Tasks must be specific (ie. no ambiguity in the wording) with a result that is either measurable or clearly defined. Tasks must also be realistic and stretching (ie. represent some amount of work on my part).

Why 1001 Days?
Many people have created lists in the past - frequently simple goals such as New Year’s resolutions. The key to beating procrastination is to set a deadline that is realistic. 1001 Days (about 2.75 years) is a better period of time than a year, because it allows you several seasons to complete the tasks, which is better for organising and timing some tasks such as overseas trips or outdoor activities.

Some common goal setting tips:
1. Be decisive. Know exactly what you want, why you want it, and how you plan to achieve it.
2. Stay Focussed. Any goal requires sustained focus from beginning to end. Constantly evaluate your progress.
3. Welcome Failure. Frequently, very little is learned from a venture that did not experience failure in some form. Failure presents the opportunity to learn and makes the success more worthy.
4. Write down your goals. It clarifies your thinking and reinforces your commitment.
5. Keep your goals in sight. Review them frequently, and ensure that they are always at the forefront of your thinking.

I have made a list of my goals at this page and will be using that to track my goals. Most of them are not financial, but some are.

So often you read about New Years Resolutions, and other goals that people have, and so often many of it goes undone. We set these goals, these expectations for ourselves and then we forget about them later. This makes goals worthless. Remembering goals and working at them every day is the only way to truly accomplish them, no matter what the goal may be. Goals help keep us progressing instead of regressing. Goals help us evaluate that progress, as well. I think goals are an integral part of getting out of a slump - but it’s working towards those goals instead of ignoring them that is ultimately going to be what moves us along in the right direction.