Tools to help you reach your financial goals

Your financial goals are the specific monetary amounts you are committed to obtaining that will allow you to realize your vision for your life. As with any goal, financial goals should be aligned with your long-term plans, whether these plans include putting children through school, maintaining a particular retirement lifestyle or paying off and staying out of debt.

Good financial goals are detailed. Generic goals such as “raise my credit score” are unlikely to push you to achieve them for a number of reasons.

First, the goal is ambiguous. What is your current credit score? How high can you realistically expect to raise your score in a set time frame?

Even if you wrote down this goal and reviewed it every day, you would likely struggle to figure out where to start, and you wouldn’t know when you’d achieved it.

Second, unless you know why you want to raise your credit score — that is, the outcome you’re hoping for by raising your score — you won’t feel a sense of urgency to achieve it. Maybe you heard somewhere that you should have a credit score of 750, but you don’t know why it matters. What’s the benefit to you?

While improving your credit score is a worthy goal for people with scores that fall in the 680 range, experts claim that there is a point of diminishing returns once you reach a credit score of 760. The question then becomes whether this goal is relevant to your current financial plan and status.

This is why you need SMART financial goals.

If you amended the goal of “raising your credit score” to “improve my 680 credit score by 25 points over the next 12 months,” you would have a SMART goal that could be tracked and measured. The ability to monitor this goal significantly increases your chances of meeting it.

Creating a realistic budget and sticking to it is a worthy financial goal in itself. Without a budget, you will flounder in your efforts to meet your goals.

Money management and financial planning rely on solid budgeting skills. Your financial goals are a component of your overall financial plan, and your budget allows you to review your plan and adjust as needed to reach your goals.

Just like professional athletes keep detailed records of their workouts and successes to gain perspective and track their progress, you can use your budget to review your financial achievements and setbacks and identify any areas of your plan that may need to be adjusted.

Your budget will also give you a feeling of control over your financial situation and the confidence to persevere in the face of financial adversity.

Another often overlooked benefit of a budget is its usefulness as a communication tool. Perhaps you and your spouse are not seeing eye-to-eye on spending habits. Or maybe your kids think money grows on trees, as the proverb goes.

The ability to present quantifiable proof of the family’s spending habits and how they are undermining everyone’s goals can support your argument for needing to cut back on take-out or putting a certain amount of money in the college fund every month.