Setting financial goals helps you use your money more effectively and improve your financial situation. Being realistic yet flexible and building off your current financial situation helps you be successful.
Review Your Budget
Understanding your current financial situation helps you create realistic goals. Review where your money goes and expenses you can cut to establish goals. Calculate the extra money in your budget that can go toward financial goals, such as paying off debt or building savings.
Prioritize Financial Needs
It's common to have several financial issues, such as high debt balances and a lack of savings. Decide which area will help you the most financially. For example, aggressively paying off debt can free up more money, which gives you more money to grow your savings. Consider what's important to you. Having a large retirement fund might be more important to you than taking luxury vacations.
If you have an extra $500 in your monthly budget, setting a goal to pay off $25,000 in student loans in the next year isn't realistic. Ensure you have the finances to achieve your goal and that the changes are things you can handle. Cutting your spending drastically can be difficult to maintain, for example.
Monitor Your Progress
Track your progress toward your financial goals to see if you're on track. You might need to adjust the goals if they're too easy or difficult. Monitoring your progress can be a motivator as you see the impact your new habits have on your finances.