7 Steps to Setting Better Financial Goals

Goal setting is a vital part of building financial success. To truly create wealth and long-term financial independence, you must have goals. Setting goals allows you to develop a more effective financial plan to achieve those goals. They can also keep you more focused along the way as life changes and affects your financial plan.

Think of it like a GPS system. You may get off-course or rerouted by external factors, but it will keep redirecting you to your final destination. This is not to say that your goals are set in stone, though. You should revisit your financial goals regularly and redefine them as needed. Financial planning is all about making adjustments and figuring out the best ways to get you where you want to go (even if that ultimate destination changes over time).

You’ll want to set long-term goals (5, 10, 20 years from now), as well short-term goals specifically for the months and year ahead. Your annual financial goals are what we would like to focus on in this article.

With this in mind, here are 7 simple steps to setting better financial goals for 2021:

Step 1: Start Setting Goals Now!

Don’t wait until January or February of next year to start setting your goals. Start planning in November or December. If you haven’t started your goal setting yet for 2021, now is the time. Reflect on your finances from this year and use that to establish your goals (and your financial plan) for next year. This is true whether you are planning as an individual or for your business.

Step 2: Questions Are the Answer

When setting financial goals, you have to ask yourself a series of very important questions. This will help you better define your objectives and priorities. Here are a few questions you should be asking:

• What do I want to achieve this year?
• What does a successful year look like?
• What would be considered a “bad” year for me?
• What values are most important to me heading into the New Year?
• What would I want to change about my life (not just financially speaking)?
• What goals would make the biggest impact on my life?
• How did I do this past year and what would I like to do differently in the coming year?

Step 3: List Your Goals

Now that you have given your goals and priorities some critical thought, it’s time to start listing them out. Compile a list of your financial objectives for the coming year and then reorder them in terms of priority. Which of these specific goals is most important for you and which are less of a priority? Prioritizing your goals is another important step to take in order to develop a more effective financial plan.

Step 4: Prepare Your Financial Statements

The next step is more tangible. You will want to revview and prepare your financial statements for this year and next. It doesn’t have to be a full report, but it can be a simplified income statement and balance sheet /net worth statement that allows you to see the numbers and understand how you can actually turn those goals into reality. If the numbers don’t add up, then it safe to say you need a better plan.

Step 5: Develop Your Action Plan

Now that you have prioritized your financial goals and crunched the numbers, you need to develop an action plan to get from point A to point B. Create your plan based on realistic steps that allow you to ultimately achieve your specific goals by the end of the year. Break it down into quarters or months. Reverse engineer the plan if you have to (working from the goals backward). Focus on one step at a time that will enable you to get where you need to be.

Step 6: Don’t Give Up

An action plan means nothing if you are not committed to it. Your goals are worthless if you aren’t deadset on achieving them. Be persistent and consistent about working toward your specific financial goals. If you run into obstacles, figure out how to overcome them. If life changes cause you to rethink your plan, revise it and reroute yourself like a GPS to your desired destination.

Step 7: Review and Revise

Never lose track of your goals and reset them if needed. It’s important to review your short-term and long-term goals regularly. What may have been the highest priority when you originally set them may no longer be as important. Maybe you achieved certain goals sooner than expected. How can you redefine them and achieve even more? Sound financial planning is all about making adjustments and continuing to redefine goals and methods of achieving those goals.

Follow these seven steps and you will be able to set better financial goals for 2021 (and beyond), and be more effective at working to achieve them. For help with all your financial planning needs, contact Illumination Wealth today for an introductory consultation. Let us be your partner in helping you put your goals within reach.