Retiring early, losing weight, and even starting a business necessitates planning to turn these dreams into reality. Each one requires that you set a series of realistic goals. Failing to do so can leave you with dreams for financial or physical improvement that are never realized.

But, it can be tough to know where to start with financial goal setting.

You might think that you have to have loads of cash sitting around before you can set financial goals. A substantial disposable income is not needed to set financial goals. Nor are sweeping, dramatic changes that require you to live on a steady diet of beans and rice. These fallacies often cause people to shy away from goal setting at a time when they should embrace financial planning. The earlier you start setting financial goals, the more time you’ll have to reap the rewards of smart money management.

You don’t need a degree in accounting to improve your financial health. All you need is a willingness to apply the tips learned here.

Tip #1: Start with one, small goal.

Success breeds success. When you succeed with one, small goal, you’ll gain the confidence needed to set and achieve your next financial milestone. Each goal should be more challenging than the last. A modest goal might be to pay off one credit card in the next six months.

 

Tip #2: Create a monthly spending plan – and stick to it!

A spending plan serves as the foundation for most fiscally-fit individuals and families. It’s too easy to spend more than you earn when income and expenses aren’t tracked on a regular basis. You can start by monitoring your current spending. Keep all receipts for the next 30 days to see where you’re spending money in excess of your regular bills. Then, make adjustments to your spending plan based on your financial goals.

 

Tip #3: Cut one unnecessary expense.

Eliminate an unnecessary expense, and you’ll have money to put towards your first financial goal. When you have a goal in mind, it becomes easier to set priorities and avoid purchases that don’t improve your financial health. Trade the money spent on phone app subscriptions, unlimited cellphone data plans or your daily trip to the coffeehouse and use it to fund your goal instead.

 

Tip #4: Create a stream of additional income.

The funds needed to make your financial goals a reality often come from your current income coupled with the reduction or elimination of expenses. To put your financial goals on the fast track, you can create an additional source of income to reach your goals quickly. This can be temporary such as a seasonal job to help pay off an auto loan or a side hustle business to tackle a long-term financial goal such as saving for college.

 

Tip #5: Open a new savings account for each goal.

Keeping separate savings accounts for each financial goal increases your chances for success. A dedicated account for each goal not only makes tracking progress easier but makes saving for your goals fun! Watching your account balances grow each month is exciting and confirms that you are in charge of your finances.

 

Tip #6: Make it automatic.

After committing to your goal, use technology to support your efforts. The less decision making needed after committing to your goal, the less likely you are to talk yourself out of it. For example, if your goal is to purchase new bedroom furniture later this year, set up an automatic transfer to your savings account towards that goal. The money will already be set aside, and you won’t have to choose between saving and impulsive spending.

 

Tip #7: Set SMART Goals.

SMART financial goals are

Specific, Measurable, Achievable, Relevant and Timely. Goals that contain each of these elements are more likely to be reached since they require realistic planning based on a spending plan and include a deadline. Here’s an example of a SMART goal:

Beginning June 2019, I will transfer $300 each month to my vacation savings account to have my trip to Canada fully funded by June 2020.

 

Tip #8: Build an emergency fund.

An emergency fund is the financial padding that shields your spending plan against unexpected expenses or emergencies. The quicker you can build your fund the better. Without one, you’re likely to use a credit card or loan to cover unexpected expenses. Start with $500 or $1000, then continue to grow the fund until it reaches at least three months’ worth of living expenses.

 

Tip #9: Don’t forget to reward yourself.

Reward yourself wisely when you reach a financial goal. Similar to improving your physical health, restricting your diet indefinitely or never taking a rest day from the gym can backfire. Use low cost or free entertainment to relax and enjoy the fruits of your labor.  You might consider free concerts in the park, treating yourself to a new book, or taking up a new hobby. Doing so can reenergize you as you create your next financial goal.

 

Financial goals aren't reserved for high achieving career professionals with large incomes. As soon as you have an income, even a part-time one, set goals for your money. The benefits of financial goal setting go beyond your credit union account. The sense of accomplishment gained each time you reach a financial goal is priceless.