What would you do if you received a large cash gift? Would you spend it or save it? Your financial wellness could be based on the outcome of your decision. Values guide us in the decisions we make about how we spend (save) money, and goals provide a basis for making choices in how we use what’s available to us. As the cost of living continues to rise, it becomes even more critical for families of every size to take a good look at how they are spending their income – what you are purchasing and why?
Emotions play a big role in how we spend money. If you can recognize what is happening, you can begin to think more carefully and make better decisions, rather than acting on feelings or impulses. For example, why are you going to the grocery store? Is it out of habit or do you really need something? Are you buying what you need or also picking up additional items?
Write down 5 things that recently purchased. Answer the following questions for each item purchased.
$ Was your purchase a need or a want?
$ Did you buy it for status?
$ Did you buy it for friendship or love?
$ Did you buy it under pressure?
$ Did you buy it for a collection?
$ Did you buy it as a reward?
$ Did you buy it out of habit?
Goals provide a basis for making choices in how we use money and other resources. Financial experts have stated, to be effective with reaching our goals we must write them down. Align goals with the current household income and expenses.
What are S.M.A.R.T goals?
S.M.A.R.T Goals move your spending towards reality planning.
ASK YOURSELF THESE QUESTIONS?
Is it SPECIFIC? Set specific goals you can clearly name (i.e., save money to get a new washer/dryer).
Is it MEASURABLE? Is it MUTUAL? Measure goals by the time and money it will take to reach them. Mutual goals that are agreed on will be easier to achieve.
Is it ATTAINABLE? Is it ACHIEVABLE? Make sure that goals are reasonable and possible. For example, “I know I can save $xxx each week to reach my goal in six months?”
Is it RELEVANT? Is it REALISTIC? Make sure your goals fit your needs. You may need to have a practical goal. Goals need to be planned according to your spending plan.
Is it TIME-BOUND? Is There a TRADE-OFF? Set a definite target date. Pick a month, date, and year. What might you need to give up or overcome to meet the goal? Is the goal worth it?
There are three types of goals, short term goals, intermediate goals and long term goals.
- Short term goals – one week to three years. Example: paying debt in full, establish good credit, create 6-9 month emergency fund, have a 3-6 month emergency fund, purchase insurance coverage.
- Intermediate goals can be accomplished in three to seven years. Example: save a down payment, plan a wedding, prepare for a birth or adoption of a child.
- Long term goals are seven plus years. However, starting them now means your resources will have more time to grow. Example: buying a new car, put children through college, retirement.
Complete the attached worksheet that will help you identify and set short term goals, intermediate goals, and long term goals? Think about this worksheet as a contract with yourself and post it somewhere you can be regularly reminded of what your are working towards.