- I work with clients on financial goals around debt repayment, growing savings, and investing.
- Sometimes the hard part is creating actionable goals that you can stick to and see real results from.
- Goals need real deadlines and actionable steps to hit, along with reminders as to why it matters.
- Read more from Personal Finance Insider.
As a money coach, I work with clients to achieve their financial goals such as debt repayment, growing their savings, and investing.
Setting goals for your money creates a financial roadmap — you know exactly what to prioritize and how to manage your money to keep you aligned on that journey.
However, it’s important to set money goals in a way that leads to actual results. Otherwise, you may find yourself discouraged and giving up on them.
Here are the top three mistakes I see clients make when trying to set money goals.
1. Writing goal statements that are too vague
When I ask my clients what financial goals they want to work towards, I always hear vague statements like “I want to learn how to save my money”, or “I want to be rid of my debt.”
There are two things lacking in these statements: action-oriented language and specific dates and amounts.
An effective goal statement uses action-oriented language such as “to increase/decrease, to pay off, to reduce” that will be measurable in its result, unlike passive phrases like “to want, learn, or understand” that don’t measure anything.
Likewise, being specific as to when you will achieve your goal and an exact amount you need to achieve it gives you an objective end result to look forward to. This way, you can keep yourself motivated as you hit milestones in reaching your goal.
To give an example of these strategies put together, an effective goal statement would be something like: “I will decrease my credit card debt by $3,000, by the date August 31, 2022.”
2. Missing an action sentence to kick-start progress
Now that we have a measurable goal statement, to kick start your progress on actually doing something to achieve this goal, we need to add an action sentence.
To use the earlier example — if your goal is to pay off $3,000 of your credit card debt by August 31, 2022, how much do you need to set aside from your paychecks each month or per pay period to achieve this?
Work backwards from your desired end date to see how many paychecks you have left. For example, you might count 14 paychecks left between February and August 31. So, you calculate that $3,000 divided by 14 is roughly $215 every month. That means you’ll need to set aside $215 per paycheck towards your debt in order to achieve this goal.
A complete goal statement would be: “I will decrease my credit card debt by $3,000, by the date August 31, 2022. I will do this by setting aside an additional $215 per paycheck towards my debt.”
Now, whether or not setting aside $430 every month is realistic for you to do in order to reach your goal is crucial to examine.
You can do this by writing down your monthly income and then subtracting your fixed expenses for the month, like rent and utilities, and then a monthly average of lifestyle expenses like groceries, eating out, and shopping. Whatever is left over is your surplus to put towards the debt.
But if you want to increase this surplus, you can work on decreasing your expenses. This may include negotiating bills, removing subscriptions, and reducing how much you spend eating out, etc.
You can also find ways to increase your income to hit your goal faster, or push back the end date that you originally stated by a few months to give you more flexibility.
3. Not aligning emotionally with your goal
It can be easy to lose motivation and stay disciplined while on the journey to pay off debt and grow your savings.
Part of the reason is because we tend to focus on just numbers and results, forgetting about our emotional connection to our goals. Here are three journal prompts to complete once you’ve curated your goal statements:
How would it feel to achieve your goal?
Visualize that moment where you make the final $215 payment on that credit card, or that moment when you transfer the final $100 to complete your $5000 savings goal. Is it a sense of relief? Pride?
How would it feel to NOT achieve your goal?
Visualize yourself in September, stuck with the same amount of debt or balance in your savings account. What feelings and emotions come up for you — disappointment, resentment, frustration?
Why do you care about achieving this goal?
What will achieving this goal allow you to do that you can’t do now? Write out this reflection, and come back to it if you’ve lost motivation or didn’t keep up with your payments on time.