Goal Development: Part One

Your Spending Plan is an important guide that can help you achieve amazing results, if you use it properly. Whether you have a lot of money or just a little, a true measure of your financial success is your ability to use a Spending Plan to meet the goals you have set for yourself and your family. Imagine, for a moment, that your financial goal is a destination you could travel to by car. To reach it, you will need to make efficient use of your money as you prepare for the journey, and you will need to set aside certain resources for use along the way. You will get a tune-up, check the tires, pack some food, etc., and you will figure out how much you will need for gas and tolls during the trip, all before you leave the driveway. Achieving your financial goals should work much the same way, because attaining them depends on thoughtful preparation.

In addition to getting you where you want to go in life, goal development has benefits beyond simply achieving the goal itself. Properly developed goals can be incredibly motivating, and, as you get into the habit of setting and achieving them, you will probably find that your self-confidence has increased, as well. By constructing a strong goal development routine, you can measure and take pride in the achievement of the goals you have set, in turn helping to ensure future financial successes.

The Seven P’s of Goal Development
The goals that you set need to be plausible, and your plan to achieve them must be precise. To meet your goals, you must prioritize their importance and properly prepare for the steps you’ll need to take for their achievement. Throughout the process, remain positive and maintain the appropriate passion to reach your goals. Finally, gauge your progress on performance and not on outcome.

It is important to set goals that you can achieve. There are few things in life more frustrating or disappointing than not meeting the benchmarks you have set for yourself. Therefore, your goals need to be realistic. For example, let us assume you want to purchase a new home within two years, and that you would like to pay for it in cash. The particular home you are interested in is selling for $450,000. Your current employment as a teacher, with a modest income of $46,000, allows you to satisfy your obligations and have some discretionary income after developing your Spending Plan. The truth of the matter is that you would probably have a better chance of hitting the lottery without a ticket than buying this house cash. Let’s examine why this particular goal is not plausible.

While your income is sufficient to meet your immediate needs, it is impossible to save $450,000 for the purchase of this home in the timeframe you wish. Perhaps a more plausible goal would be to save for the down payment, roughly 5% of the purchase price. In total, you would need $22,500. In order to save this amount within 2 years, you would need to save $937.50 each month toward this goal. Only you can assess if this is appropriate, and that is only after you have developed a Spending Plan to determine what discretionary income you would have to commit to the purchase. You may find that $937.50 is beyond your capabilities, and that is fine. The lesson here is setting unrealistic goals can be harmful as an individual may begin to lose hope of ever achieving their dreams. By developing plausible goals, you will not only increase your odds of meeting them, you will also help yourself maintain a positive outlook on the future.

The more specific your goal is, the more realistic your chance of success. By making the goal specific in nature, you will “own” it. For instance, let us say your goal is modest — you would like to buy a new couch. Instead of simply establishing the goal, go out and find the exact couch you intend to purchase. Once you have seen it and had the opportunity to take it for a test ride, you will form a personal connection to your goal. You will not simply be saving money for a couch; you’ll be saving for your couch.

A precise goal that many of us may easily associate with is that of getting out of credit card debt. Being precise in the practice of paying off credit cards can be quite helpful as well. For instance, an individual may have three credit cards that they wish to pay off. They may opt for a measure to make minimum payments on two of the cards while focusing a predominant amount of their budgeted credit payments to one card. In doing so, the individual will create the discipline of committing established funds toward debt repayment and receive the psychological benefit of the achievement in meeting a portion of their goal when the card is paid off. Once the goal of eliminating debt on one card is achieved, the funds can be dedicated to the second card and so on.

… to be continued.

For more information, or to speak with a certified credit counselor please contact Cambridge Credit Counseling at 800-897-2200 or www.cambridgecredit.org.

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