The first step to effectively manage your money is to plan it. Like you probably see in the company you work for or in your own business, budgeting involves the establishment of SMART (Specific, Measurable, Achievable, Relevant, and Time-bound) goals. As follows, some brief examples of goals in each of the financial time-bound:
- Short-term (0 to 4 years): to create an emergency fund, to liquidate debts, to pay a good vacation, to buy a new car, to do a big party on your 40th-anniversary or revamping your home. Can be one or another or all together, depending if your cash flow supports your other terms’ goals.
- Medium-term (5 to 10 years): the down payment to buy a new house (or anticipate the payments skipping mortgage interest), to liquidate all debts, to pay the College for your children(s).
- Long-term (more than 10 years): early retirement, retirement (eventually will be discussed later in this blog), wealth succession.
An important remark: the definition of time-bound above can vary depending which life stage you are in and, of course, your age.
Determine the amounts needed by searching and budgeting realistically and specify when would you like to achieve it.
Find below a goal worksheet from Money Management:
Revisit your goals periodically and/or when occurs a material change in your life. For example, health problems, relocate to other work or location, a divorce, etc. But do not change it each week or month, otherwise, it will be harder to achieve your financial wealth (not speaking the time consuming of doing it).
By setting realistic and tangible goals, you not only create the foundation for a financially healthy life but also avoid frustrations in future.
The second step is to know your cash flow, which will discuss in the next post. See you there!
Cambridge University Press. (2018). Cambridge Dictionary: English. Retrieved from Cambridge Dictionary: https://dictionary.cambridge.org/us/dictionary/english/medium-term
Heffernan, P. (2015). How to Create Change for Good with SMART Goals. Retrieved from Change Conversations: https://www.marketing-partners.com/conversations2/how-to-create-change-for-good-with-smart-goals
Mind Tools Content Team. (n.d.). Smart Goals. Retrieved from Mind Tools: https://www.mindtools.com/pages/article/smart-goals.htm
Money Management. (n.d.). Personal Financial Goals. Retrieved from Money Management: http://www.moneymanagement.org/Budgeting-Tools/Credit-Articles/Money-and-Budgeting/How-To-Set-and-Keep-Personal-Financial-Goals.aspx?RCTAG=FLM
Money Management. (n.d.). Smart Financial Goals. Retried from Money Management: http://www.moneymanagement.org/~/media/Files/MMI/Topics/Browse%20Topics/Media%20Types/Articles/Smart-financial-goals.pdf
Rose, J. (2017, December 16). Good Financial Cents. Retrieved from Good Financial Cents: The Top 10 Good Financial Goals That Everyone Should Have: https://www.goodfinancialcents.com/good-financial-goals/