I love to create goals for myself. I’ve created goals for my websites (number of subscribers, revenue, etc), my health (weight loss, miles walked, etc.), and my finances (debt repayment, emergency fund savings, etc.) Currently, I have a goal of saving $4000 before April 1, 2007 for my children’s Educational Savings Accounts. (The actual long-term goal is to save enough money for my children to attend a public university in Georgia. The short-term goal is the amount, in this case, $4000.) To achieve my goals (both the long-term and short-term goals), I need to create some plans. Again, I need a short-term plan, for the short-term goal, and a long-term plan for the long-term goal. (In reality, the long-term plan is simply a succession of short-term plans, strung together, one after the other, until the long-term goal is achieved.) The absolute keys to good goal creation or plan creation? Do things in the right order and be realistic.
One of the main reasons I was so attracted to Dave Ramsey’s Baby Steps was the orderly fashion in which goals are attained. He calls this process the “Baby Steps”. I’ve taken this concept and molded it to fit my own personal situation. So many people try to solve all of their personal finance issues at one time. In the end, very little actual progress is made. Why? A military strategist might call this, “fighting a battle on multiple fronts”. To use another analogy, think of it like a wide-receiver in football. He must catch the ball BEFORE he can run with it. A MUST come BEFORE B. We all want to retire with money, send our children to college, live in nice homes and drive nice cars, but, it is almost impossible to focus on all of those goals SIMULTANEOUSLY. (Sure, we always want to be aware of the “big picture”, much like a receiver must know how much time is left on the clock or where the first down marker is, but we need to be able to FOCUS our energy at a particular point. Above all else, CATCH THE BALL!) Don’t try to master everything at one time. Are you in debt? Focus on paying off your debt. Better yet? Focus on paying off one debt. Even better yet? Focus on paying as much, this month, towards one, particular debt. See how that works? As you focus on A, you get closer and closer to B. Do this over and over, and you will make orderly progress towards all of your financial goals.
What about the second key? Be realistic. If you make $25,000 and have 3 kids, and $30,000 in credit card debt, don’t set a goal of being out of debt in 6 months. At the same time, don’t set a short-term goal of (fully funding my retirement, fully funding children’s college, buying a new car, etc.). On the other hand, if you make $100,000, and have $30,000 in credit card debt, don’t set a goal of being out of debt in 60 months. Set a goal of being out of debt in 6 months! Be realistic. Look at YOUR situation, not someone else’s. Most people are as unrealistic about setting personal finance goals as they are about setting weight loss goals. For a goal to mean anything, it must exist in the realm of possibility. That being said, it is perfectly o.k. to “reach for the stars”. One of my goals for 2007 is to save (in various accounts) SIXTY percent of my gross income. I realized as soon as I created this goal that, while it IS mathematically possible, it will not be easy (in the real world). But, it will remain as my goal, because it is “realistic” in the sense that I CAN achieve it, or come pretty close. It’s o.k. to create goals that require great sacrifice, hard work, and determination. You will shoot yourself in the foot, however, if you create goals that are “impossible” to reach.
So, there you have it. That’s how I create my goals, long- and short-term. Any input or questions? Leave a comment.
Your blog has me motivated to clean up my debt act.
Thought I would pass along a good freebie spreadsheet structured for the debt snowball. It can also be used with the high to low interest method as well.
I also added a field that took the difference between the intitial balance and total projected paid by adding up the sum for each month. Thay way I could run what ifs to see the impact on the overall amount of interest paid…That has been a great motivator to maximize my payment strategies!
http://www.geocities.com/snidecl/debtsnowball.html
NCN, i like this posting. obtainable goals is the key, and to break old habits. when i was climbing out of debt, i had everything organized. makes me wonder why i never put as much focus on finances to not be in debt. the key though, it a budget. you cannot get out of debt and stay out of it without one. budget forces you to actually look at where you stand and where you can go. i set up an excel spreadsheet listing all my creditors, how much i was paying them each month and refigured interests, so I could see exactly where I stood a month to month basis.
patience is another key thing. this is where I’ll disagree with what you stated about if you make $100k and have $10k reducing paying off from 6 months to 3 months. i had the ability to pay off everything about 6 months ahead of my goal. The problem is, if I did it, I wasn’t forcing myself to stick by the goal I set and living by my budget. Something could have happened, and maybe I needed the money and then I’d be in debt again.
it’s also counter intuitive to be saving while trying to pay off debts, but that’s an important thing to get in the habit of saving.