Ensure financial goals are clearly defined

When you pursue your financial goals, your budget can help you stay on course, develop a steady pace, and even allow you to pick up speed on your way to the finish line.

But before you rearrange your budget to fit your goals, it can help to consider the goals themselves. Are these the goals that are the most important to you? Are they realistic? Are they defined in a way that allows you to track your progress? Here are a few things you can do, to keep your goals in good shape.

• Start now. The sooner you decide on your goals, the sooner you can tailor your budget toward achieving those goals. Many of your financial goals are going to depend on time — on making steady, sustainable progress as each month goes by. Knowing your goals will also motivate you to alter your spending habits as soon as you can.

•Protect your goals with financial safety nets. Being on track, and staying on track, will keep you motivated. When an unexpected expense suddenly depletes the savings intended for another goal, it can be tough to start over. Protect yourself and your goals by building up your emergency fund, and aim to save at least three months worth of living expenses. Also check on your insurance coverage, to make sure you’re protected against major catastrophes.

•Keep core financial goals in mind. While people have different goals to fit their needs, there are a few standard goals that everyone should consider. Paying down your consumer debt will free up space in your budget for savings. Saving every month for retirement will allow you to steadily build your investments as your money compounds. Buying a home is a financial investment with practical use, as home values appreciate over the long term. Think about what’s right for you.

•Find a specific amount for each goal. With any goal, it helps to have a finish line. You’ll be able to predict how much time it will take to complete a goal, and track your progress by calculating the percentage you’ve saved up for. It can take a bit of research, but it’ll give you a greater sense control.

•Translate each goal into monthly amounts. The best way to find out if a goal is realistic is to calculate the monthly amount it would cost to reach that goal. T he longer you choose to stretch out a goal, the less you’ll pay every month. To shorten that amount of time, adjust your overall goal downward. Understanding the monthly amounts involved can make a large goal more accessible.

•Distinguish between your needs and wants. Some goals are pure needs, and others are pure wants. Many goals can have two versions: your “need” version and your “want” version. You should try to outline both versions, along with their specific amounts. Knowing both will help you prioritize — it could be that you’re willing to accept the “need” version of a car if it means saving more for your “want” version of a house. When you can see your specific options in front of you, you can make smarter decisions.

Michael Camacho is the president and chief executive officer of Personal Finance Center. He has more than 18 years experience in retail banking and with financial institutions in Guam and Hawaii.

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