Why You Should Set Financial Goals

Recently, I’ve been sharing our story of how we met last year’s financial goal of saving up to pay cash for our first home. While that goal might be unrealistic for you, I highly recommend that you make it a practice to set financial goals each year–even if they are seemingly “small” goals. We’ve been doing this for the past three years and have been completely amazed at what a difference this simple act has made in our lives.

Here are three reasons I believe everyone should set financial goals:

1) Goals Give You Purpose

“If you aim at nothing, you’ll hit it every time.” If you don’t have financial goals, there is little reason for being frugal, clipping coupons, or sticking with a budget. Goals, on the other hand, give meaning to your efforts.

When you have a purpose for why you are forgoing eating out or shopping at thrift stores or driving an old car, it’s much easier to stick with it for the long haul.

2) Goals Give You Accountability

We write our financial goals down at the beginning of the year and then review them throughout the year to track our progress. The exercise of discussing and writing down our goals forces us to be accountable–to one another and to the goal sheet. It’s a lot harder to go blow a sizable amount of money on a needless purchase when you know you’ll have to face that goal sheet hanging on your refrigerator.

3) Goals Give You Momentum

Tracking the progress of our yearly goals on a monthly basis is a huge motivation for staying on track. We’ve found that it’s helpful (and fun!) to break down our yearly goals into monthly bite-size chunks and then challenge ourselves to see if we can exceed those.

Sometimes, it can feel like you are spinning your wheels and getting nowhere. Just as soon as you save up enough money to replace the broken washing machine, the car breaks down. However, we’ve found that even if we’ve had a month with lots of financial setbacks, the goal sheet serves as an encouragement to us that we are making progress and going something–even if it’s at a slower pace than we’d hoped. And that always inspires us to keep at it!

Do you set yearly financial goals? If not, what are you waiting for? Mandi over at Organizing Your Way has some excellent input here to help you get started on your financial goal-setting journey.

photo credit: hpk

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