Every year my husband and I sit down and make financial goals. We make financial goals for the year that we are in, we set goals for 5 years down the road and 10 years in the future. Our goal setting helps us to be on the page when it comes to our finances. Communication is key when you share your finances with your partner. Today I am going to tell you how my husband and I go about setting our goals.
1.) Decide on your priorities. The first step to setting goals is to determine which goals are your priorities. Is it to get out of debt? Increase your savings? Start an emergency fund? Our first priority is always to do something responsible with our money so that we can increase our net worth. Last year we decided to increase our savings and become consumer debt free. We paid off our vehicle early and built our savings account. I can't tell you the difference it has made for us to not have a vehicle payment. Our mortgage is now our only payment. That is incredibly freeing. This year we want to increase our emergency savings from 3 months expenses to 6 months expenses.
After we decide on our financial priority we figure out how to reach our goal. We then incorporate our goal into our budget so that it becomes a 'must do' with every paycheck.
2.) Decide on secondary goals. When I say secondary goals, I mean goals that will take a backseat to your main goal. My husband and I would like to install central air in our home this year. We are really hoping to be able to reach our goal this year, but it will only happen if our main goal stays on track. Once again, we go through our finances so that we can determine what we need to do in order to reach our goal.
3.) Plan for the future. We have some big goals for the future. The beauty of setting goals for the future is that you are free to dream big and can adjust accordingly. We would like to take a family trip to Maui in 2021, remodel our kitchen in the next ten years, and take our children to Disney World in the next 10 years. We dream big and then decide what it would take for us to reach those goals. I got a quote from a local travel agent for the cost of a Maui trip. We also got ballpark figures for our kitchen renovation. Numbers make it much easier to decide what is plausible.
Our yearly (and then monthly) chats help my husband and I decide how to use our finances and work towards common goals.
How do you set your financial goals? What helps you to stay on track? I would love to hear all about it!