Goal Setting 2
In the last article we started to talk about the need to set personal financial goals or objectives. Before, making your plan, here are some tips on what you should be ready to do:
1) You have to put it in writing! There is a study that shows that people who succeed write their plans. You must have a written plan for each goal.
2) You can have different goals but you must state it in positive terms. It is not enough to say that you want to save or that you want to cut expenses. You have to know what it is that you are saving for and specify each goal in terms of amounts.
3) You must have a specific timetable for each goal. If you have a timetable, you will not procrastinate because you know when you have to reach it. At the same time, you will realize how realistic your goals are based on your timetable.
4) You have to be ready to monitor your progress.
Now and in the coming columns, I will present you eight questions that you need to ask yourself to be able to set your financial goals:
1) What level of lifestyle do you want?
Each person has a dream of the kind of lifestyle he wants. What is meant by lifestyle? Lifestyle is the standard of living. This is usually defined in terms of the expenses needed daily/monthly/yearly. The higher the standard, the higher the expense.
The highest standard is that of the “rich and famous” normally equated to being in the society pages of the newspapers, driving around in expensive cars, having a big house, regular travel, hosting big parties regularly etc. However, you will be surprised that sometimes these people are actually not as rich as they are portrayed to be. Many of them are deep in debt that if they suddenly die, their heirs might be left with so many problems instead of inheritance.
Many people will say that they just want lots of money to spend without any idea of what they want to do with it. If they don’t know what they want to spend for, any amount of money can very quickly disappear. What is important is that you have a good idea of how much you would like to spend every day/ every month/ every year that will make you comfortable.
You can start with your present lifestyle. You know how much you spend regularly. If you are regularly in credit card or other kinds of debt, you can estimate how much more income you really need over what you are actually receiving, to maintain your present lifestyle. If you are unable to earn that additional income, you have to downgrade your present lifestyle or go to the next question next week.