Step 1: Setting Realistic Financial Goals
Before you can begin to manage your money, you need to identify what is important to you. Then you have a foundation to decide what you want to do with your money. Write down what is important to you and use your list to help you determine goals for your money. Some ideas to help you get started are:
If it is important for you to...
- Live without money worries
- Have a home for your family
- Spend time traveling
- Enjoy camping with friends
- Help your children gain an education
- Start a business
- Drive a particular kind of vehicle
Your goal may be to…
- Pay off credit cards
- Save 3 months of rent for “just in case”
- Build up savings to take time off work
- Buy new camping supplies
- Contribute to an RESP
- Save enough to apply for a business loan
- Save up a moderate down payment
Keep your goals simple - don't overthink it
This isn't as complicated as you may think. A short–term goal might be to pay off debt or buy a new appliance. A medium–term goal may be to take a cruise or save the down–payment for a new car. Long–term goals typically include plans for retirement, paying of a home or helping children start out on their own.
The goals you set are yours; you have the power to choose what is important to you and design your goals accordingly. Most people’s money problems occur because they don’t clearly know what they want to do with their money and therefore spend it randomly. Clear goals are the targets you are aiming for and help you build your plan. After that, it’s a simple process to map out how you will achieve your financial goals.
When setting financial goals, think about how much you need to save and for how long. Then think about how you will accomplish that savings. For most people, this means putting a set amount aside each month, according to their pay schedule. This monthly amount is the difference between just having a wish… or making your wish a reality.
Be realistic when setting your goals. You can always increase your savings later, but start by planning for success!
It can be strangely motivating to see your plans in black and white, so take some time to write down your financial goals. Grab a pen and paper and jot them down, type them for yourself on your computer or your phone, or print this page and write them down. You can use the table below as a guide.
A household spending plan involves all members of the family. Take the time to set goals that everyone can agree on. This may take some negotiation, but you won’t be able to maintain a budget if the whole family isn’t on side. If you have younger members of your household, consider incorporating a family goal so that they can be part of what you are working towards, e.g. let them see the coins add up in the jar and use the money for an annual pass to their favorite recreation activity. Learning how to save is a valuable habit that will last a lifetime!
All members of the household need to actively participate to ensure the budgeting process is successful. Have family meetings to check on progress and make adjustments if necessary. Everyone needs to be aware of how the spending is carried out. Draw on each other’s strengths and use them for your family’s benefit. One person may be good at organizing the shopping list while another is the number cruncher and can record the spending in a notebook, ledger or use money management software efficiently. If everyone is aware of how the spending is decided, it’s easier to support each other during the challenging times. Focus on solutions, rather than blame, if the going gets tough.
Next Up: Income and Expenses
You probably know how much you earn each month – but do you also know where it all goes? Find out by tracking what you’re spending. Spend as you normally would, but for a few weeks, jot down every cent you spend. It’s easy and you might be amazed by what you find out.