A Step-By-Step Guide To Achieving Your Financial Goals
Setting financial goals is important for your financial security. Setting a financial goal will force you to look at the big picture of your finances. If you don’t have a goal, you don’t have anything to work towards, so your money won’t be working as hard for you as it should.
But once you’ve set your goal, be it short term like a nice vacation, medium term like a car downpayment, or long term like retirement, you have to work towards it. So how do you do that?
To help you out, we’ll use the example of saving up money for a car downpayment, but you can substitute whatever goal you have in the steps below. We’ll show you the steps you need to take to put yourself in the perfect position to achieve your financial goals.
Goal: Save ₱153,600 for a car downpayment
Setting a goal is the first thing you should do. Achieve your financial goals by following these next steps:
Step 1: Study your current financial situation
Before you start saving up for your car, think about your current financial situation. How much money are you making per month? After all your expenses, is there enough left over for you to save towards the car?
Do you even really need a car, or are there more cost-effective options? Once you save up all the downpayment, will you be able to afford the monthly amortization? Use your current financial situation to make sure that your goal is achievable.
Step 2: Develop a timeline
Now that you’ve established your need for a car, find out how much money you need to save over what period of time. In our example, you’ll need ₱153,600 for a 20% downpayment on a car whose standard retail price is ₱768,000.
Develop your timeline so you know how much you need to save per month. Let’s say you choose a timeline of 3 years — you’ll have to save ₱4,300 a month to afford your car in that time.
Step 3: Make room in your budget
If you’ve studied your current financial situation, you’ll know whether ₱4,300 a month for the car is feasible for you. If you’re short, find out what expenses you can cut so you can keep saving for your mid-range goal of affording the downpayment for a car.
Be prepared to sacrifice some short-term comforts for this medium-term goal.
Step 4: Identify the actions to take
You’re going to need to put that ₱4,300 a month somewhere. Open a savings account — it’s a smart move to make for a medium-term goal like a car down payment, because it lets you have easy access to your money without penalties.
You may also need to increase your cash flow in order to afford your goal. Besides paring the rest of your budget to add to your goal, also explore options to add to your income, such as selling unwanted items, taking on side hustles, or beginning to invest.
Educate yourself on personal finance so you can make better financial decisions and get to your goal faster.
Step 5: Monitor your progress
It’s a nice psychological boost when you see yourself making real progress towards your goal. Every six months or so, check your progress and ask yourself, “Am I putting in as much money as I should to get my car in 3 years?”
Be honest in your evaluation. If you’re making good progress towards your goal, then great! Keep it up. If not, it might be time to move on to the next step:
Step 6: Make adjustments
Life moves fast. If the car’s down payment changes, you’ll have to adjust along with it. Or maybe your income situation changes. If your income takes a hit, adjust your goal; perhaps look into a car with a lower downpayment, or reconsider your need for the car in the first place.
If your income rises significantly, then adjust your timeline; you may be able to fast-track it from 3 years to 1, for example, or you may want to get a different car, which means you’ll have to adjust your monthly saving goal. Whenever something significant happens that affects your lifestyle or your income, re-evaluate your situation, and roll with the punches.
Step 7: Celebrate!
Saving is hard. So once you’ve saved up enough for a down payment and driven your car out of the shop, treat yourself! Don’t go overboard, though — keep your celebrations within your budget, so you don’t feel guilty afterwards.
Step 8: Get ready for the next goals
Now that you’ve succeeded in this goal, you’re ready to take on new ones, like paying for a new house, or saving up for retirement.
So whatever your financial goal may be, now you have a road map on how to achieve it. It’s not easy, but you’ll deserve your reward when you get it: the car you’ve worked hard to achieve, the dream home you’ve been saving up for, or the good life when you retire. You just have to make a plan and stick to it.
This article was first published in November 2014 and has been updated for freshness, accuracy and comprehensiveness.
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