Household, as defined in the Websters New World Dictionary and Thesaurus, means “the home and its affairs”. One of the affairs all households have in common is a budget – “a plan adjusting expenses to income”. What is not as common in all households is the ‘plan’.
The first step in succeeding in any plan is setting goals.
Why start with setting goals?
To get somewhere, you need to know where you’re going.
In budgeting, we set goals to help define what is important to us and what we value most. These are your targeted goals. In the case of multi-person households, they are what you are all working together to achieve.
Do you want to save a down payment for a house or pay off the one you live in quicker? Do you want to send your kids to a specific school or summer camp? Maybe you want to pay your monthly bills, on time, in full every month.
Setting goals, and writing them down, helps to make what you would like to see happen real. You are outlining the steps you need to take to reach them.
** Be Aware ** When writing down your goals they should be SMART:
S pecific – defined and concise
M easurable – to see how you are doing
A ttainable – have a definite ending point you can reach
R ealistic – is true to your individual situation and abilities
Time Specific – the period in which you will reach your goal
3 Different Types of Financial Goals
When setting goals for your Household Budget Plan, there are three specific types:
Short Term Goals
A Short Term Goal is one that you set to achieve within one years time. This could be getting all your bills caught up, gifts for your family, a set of winter tires for your vehicle, starting a blog.
Short Term Goals can also be the baby steps towards a Mid-Term or Long Term Goal.
Mid-Term Goals are what you want to achieve between 1 and 5 years from now. Things like a cruise, a new to you vehicle, paying cash for a night course or an emergency fund are all examples of Mid-Term Goals.
Long Term Goals are the ones you reach for in 10 or more years. Common ones include retirement or education funds, paying off a mortgage or moving to a new country. These are the goals you are setting when you envision your best life and help you to achieve it.
Use the worksheet below to help you set your Financial Short, Mid and Long Term goals.
Goal Setting in Action – A Personal Example
Kernel and I were just a couple years into our marriage when he got pretty busted up at work. Because it happened in the company parking lot, after his shift, he was not covered by the company provided Loss of Income Insurance.
The car we had at the time was a standard shift and I (still) don’t know how to drive one.
We didn’t have an emergency fund or really any savings at all and I was making the lesser amount of the two of us.
For months after his accident I took the public transit back and forth from work and Kernel had to use taxis to get to all of his appointments. To pay for the increased transportation costs, I missed paying on all our monthly bills, except rent, for two months. Oh Crank!
Here are the goals we set related to this mess:
S – Pay all the utilities back to balance within the year
M – Progress was measured by the back balance shown on the new monthly bill owed to each utility
A – Paying more than the new monthly charges on each utility will pay them off
R – The extra amount is decided on a monthly basis according to our needs in any given month
T – The anniversary of his accident is our deadline
S – Save $7,000.00 for a used vehicle, with an automatic transmission, in three years
M – Start a TFSA to grow the savings, without paying monthly fees, and watch the balance
A – Putting aside the amounts we paid to get our utilities paid up will give us the money within 36 months
R – We will have learned to live without the money and survive, so we can continue to live without it
T – We will use the 4 year anniversary of his accident as our time line
S – Save $10,000.00 each in a TFSA specifically for medical expenses in our retirement
M – Measure by the balance in the TFSA
A – (at the time) We have 33 years to save $303.31 annually or about $25.00 per month
R – $12.50 per paycheck
T – 33 years
So how’s it going?
- Within eight months we were able to get the utilities back to balance and start saving for a new to us vehicle.
- We paid cash for a used car and a set of winter tires within 24 months.
- With Kernel off work for most of that year, I had a boost in my income tax return that went towards our retirement medical fund.
We are on track and Kernel is just fine.
Setting Short, Mid and Long Term goals help to define the steps you need to take to achieve what you want your financial life to look like. Now and down the road. It will show you what the tough spots are likely to be and give you an idea of when things will feel easier.
Write down your personal goals using the Financial Goals Worksheet.
May God guide you on this first step of your financial journey.
Building Your Household Financial Foundation? Check These Out:
Find Your Starting Point – Calculate Your Net Worth
Where Did All the Money Go? – Examining Household Cash Flow
How to Create a Monthly Budget Spending Plan
7 Steps to Creating a Simple Paycheque Budget
Websters New World Dictionary and Thesaurus
Title Photo Source: A Digital Dreamer – cc0
Goal Photo Source: Jon Ottoson – unsplash.com – cc0
Please Note: I am not a licensed professional. The information in this post is for reference and entertainment purposes only. If this post inspired you to try something new, please speak to a licenced professional or financial councillor first.