Setting and Achieving Financial Goals
- Tuesday, May 13, 2008
The plans of the diligent lead to profit as surely as haste leads to poverty. Proverbs 21: 5
To “profit” simply means you still have money left after all your expenses are paid. We’d all like to be profitable, but why is it so hard to get there sometimes? Many of us seem to be perpetually behind financially. And when our troubles result from poor choices we’ve made, we may not know how to fix our situation or prevent it from happening again.
A case in point: An episode of a recent talk show featured a family that was about $80,000 in debt. They met with a financial counselor, refinanced their house and were able to take $50,000 from their house and pay off quite a bit of debt. Unfortunately, when they came back on the show a year later, they returned with an additional $37,000 on top of their original debt. The financial counselor said that based on these results, this family didn’t really want to be debt free - they just wanted to relieve a little pressure. Once some of the pressure was relieved, they were “done” in their minds and went back to spending money.
This scenario plays out in so many people’s lives. Yet, I’ve never heard anyone actually say, “I want to get out of debt - and after that I want to rack up more debt!” Sounds crazy, right?
I believe one of the best remedies for financial stress and yo-yo budgeting (getting in debt, getting out of debt, getting back in debt, getting back out of debt, etc.) is rooted in Proverbs 21: setting financial goals. With goals you are no longer wandering aimlessly but know where you are going and know exactly how far you have to go before arriving.
Before my husband and I paid off our credit cards, we had goals for what we wanted to do with the extra credit card payment money when we no longer had to make those payments. And before that goal was reached, we planned for another goal to shoot for after that one. I believe this practice is what’s kept us from going back into debt. We have clear plans for what we want to do with our money and while we may get sidetracked from time to time, we still have our goals to guide us.
If you don’t have any financial goals yet, I encourage you set aside some time to pray about what goals you want to set and then sit down and write them out. You’ll want to evaluate your current financial situation as well as what you want your financial future to look like and figure out what steps will get you there. When writing down your financial goals it’s a good idea to include specific time frames for reaching your goals. You may or may not meet those time frames, but at least you’ll be able to see how you are doing along the way and adjust as necessary.
If you are married, goal-setting is a great opportunity to sit down with your spouse and communicate about your money and your future dreams and plans. You’ll want to make sure you are on the same page or can at least arrive on the same page because if you and your spouse have different goals for the money you share, I promise you there will be trouble ahead.
Since everyone’s financial situation is different, everyone’s goals will be different too. As you pray about this, God will direct you to what areas of your finances need improvement, but to help you get started, let me offer a few ideas:
Create an Emergency Fund: The first thing my husband and I started saving for was our emergency savings fund. This is important because it can help save you from going into debt when the unexpected occurs. Many Christians sadly assume that God will prevent any catastrophes from occurring in their finances and are very surprised when they do occur. God often gives us the means to set aside money now to take care of future needs. Proverbs 6:6-8 talks about how an ant stores up food in the summer so he will have enough food in the winter when the supply is non-existent.
If you currently live paycheck to paycheck and maybe have to “float” bills once in a while, I would suggest this as your first step. This can give you a much-needed cushion. Just remember that this should be kept stocked so if you take money out of it, be sure to replenish it or you’ll end up in the same situation.
I’ve heard many experts suggest somewhere between 3-6 months of living expenses for your emergency fund. That can be quite the chunk of change, especially if you are struggling to pay your bills. If this is the case, start with a smaller amount, like 1 month or even 2 weeks. Something is better than nothing.
Eliminate (or at least reduce) debt: An ultimate goal should be to pay off all debt. For some, this might take only a few months, but for others it could be a longer and more painful process. If you have a smaller amount of debt, you can make separate goals to pay off specific accounts (credit cards, car loans, etc.) and an overall goal to be debt free. If you have a larger amount of debt, you might want to set some goals based on a certain percentage or amount of your total debt. For instance, one of your goals may be “I/We will pay our student loan debt down $5000 this year” or “I/We will pay off 50% of our current car loan by XX date.” Reaching your smaller goals will help give you the motivation to continue onto the larger goals.
Retirement Contributions: If you are not contributing to any kind of retirement plan, your first goal may be to start doing so. If you are already contributing, perhaps you can set a goal to increase your contributions by X amount a month or to contribute a total of X amount in one year. I suggest you try and stretch yourself a little here. If you are currently saving $100 a month to retirement, maybe make a goal of $1500 for the entire year. That way you’ll be looking for ways to add an additional $300. It’s amazing how creative you can be and where you can find money when you are motivated to reach a goal.
Save for a Large Purchase: Maybe you want to buy a car in the near future. Instead of going out and obtaining a loan for a brand new one, maybe your goal can be to save up and pay cash for a car. If that goal is a little far-fetched for you, maybe you can save for a down payment of 25% or 50% of the purchase price. It will be harder than getting a loan for the whole thing, but you will have the satisfaction of knowing you saved for your car, plus you can use the money you save in monthly payments to help meet another financial goal.
Give More: For those already giving, set a goal to increase your giving by a certain amount or a higher percentage of your income. Or seek out another worthy organization beyond your church or even a person or family within your church that you can give to. If you aren’t currently giving, make a goal to start - even if it’s only $10 a month. It may seem like a small amount, but it can make a difference.
Increase Your Net Worth: Your financial net worth is your bottom line for your finances. For those who don’t know, your net worth is how much you have in assets (savings, retirement, home equity, etc.) minus how much you owe - giving you the amount you really own. If you owe more money that you have in assets, you have a negative net worth. If you have more than you owe, you have a positive net worth.
Setting a goal to increase your net worth can help you stay focused on your bottom line. For instance if you pay off one bill but take out more debt somewhere else, that affects your net worth. If you have a negative net worth, you can set a goal to at least get in the positive. If you already have a positive net worth, set a realistic goal of where you want to be in a year or two or five.
For all your goals, I encourage you to write them down somewhere where you can review them regularly. You can post them on your refrigerator, on your nightstand, in your PDA, or wherever is easiest and most convenient for you. When you see your goals often, you are reminded of why you are being disciplined and what your future reward is. And don’t worry about choosing the perfect goal. At your goal date you may be just shy or way ahead of your goal. The point is that you are moving in the right direction and you’ll eventually get there. Just remember Proverbs 16:3: “Commit to the LORD whatever you do, and your plans will succeed.”
Cortni Marrazzo currently resides in
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