Get that vision board out, Cleveland MS! First, achieving your financial goals relies on envisioning them and creating opportunities. But, like anything in life, it takes a solid plan of attack to reach the goals you have set for yourself. The city of cleveland ms is a WONDERFUL place to live but there is a shortage of financial resources. So whether you want to pay off debt, build up your savings, save for retirement, or set aside funds to take your dream vacation; setting SMART financial goals is key to achieving any money target. SMART goal setting turns undefined intentions into concrete, actionable and attainable plans.
Step 1: Set SMART Goals
- Specific
- Measurable
- Achievable
- Realistic and
- Time-based.
1. Specific: State your goal succinctly and clearly. This should be a detailed vision. The more specific your goal is, the more likely you are to plan for it and achieve it.
2. Measurable: Assign a figure, that is as accurate as possible. This could be a numerical number but it’s a measurement that leaves no doubt about whether or not you’ve achieved your goal.
3. Achievable: This is where you combine the dream board with realism. Ensuring that the goal you have set can be reached and isn’t too lofty.
4. Realistic: Even if it’s within reach, does it make sense? What are the trade-offs? Is this a goal that will benefit your long-term future?
5. Time-based: How long is it going to take to achieve this goal? The answer (or estimate) will tell you if it’s a short, medium, or long-term goal. Forecasting important factors like your future income, inflation rate, and the potential return on investment become more important the longer your time horizon is.
Maybe you have already been using SMART goals and are ready to set a budget to accomplish your SMART goals!
Step 2: Create a Budget
The age-old challenge…keeping spending under control! That’s where budgeting comes in. However, building and sticking to a budget can be daunting particularly as you try to align vague categories with your real-life spending. Is Chipotle a want or a need? What about Starbucks (just kidding, it’s absolutely a need). Whatever tools or methodologies you decide to use, all budgeting concepts start with the same goal: defining how you spend your money.
Here are three steps to get you headed toward budgeting success:
1. Track your spending because the whole point of budgeting is to get a clear view of where you’re spending. To do that, you need to track your spending. If like many Americans, you spend most of your money using a debit or credit card, all of your spending is easily accessible using through your bank.
2. Group your expenses in a way that makes sense to you. Some common groups are household necessities, auto maintenance, groceries, dining out – you get the idea! Now, allocate which expenses fall into which group. Most major banks will group expenses for you automatically, but there are also free apps to help you accomplish this.
They’re pretty smart, but they’re not perfect, so always double-check the work. Once everything is in its group, find the averages. You need a sense of what your average spending per month looks like so you can judge if you’re spending more or less than expected.
3. Follow a plan when cutting back on spending, weigh your options. If you love Starbucks coffee, it’s okay to keep it but you might need to balance that against your habit of eating out for lunch every day.
If your budget makes your life unpleasant then you won’t stick to it, and you’ll never get ahead. Try to automate saving for specific goals by setting up a recurring transfer from your checking to your savings account. Don’t go overboard on the automated saving – just set up a manageable amount and let it run for a few months. You’ll be amazed at how quickly it builds up. Think of your budget as a monthly habit.
The hardest part is getting it set up. Once that happens, you will need a Budget System, which is basically just methods used for updating the expenses, comparing the current month’s spending to the last few months to see how things tallied out.
Step 3: Choosing a Budget System
You need a budget! It’s one of the first pieces of financial advice many of us hear as we approach adulthood. Budgeting isn’t a one-size-fits-all exercise, though. Fortunately, there are several systems are out there to help you get started on or refine your budgeting journey!
Here are the four most commonly used budgeting systems available:
1. The Line-Item Budget is the most basic budgeting method. You list out all of your expenses, both necessary and discretionary. This includes housing costs, transportation, insurance, utilities, food, fuel, clothing, entertainment, and savings. This approach may work best for those who need to get spending issues under control.
2. The 50/30/20 Budget splits your budget into three big categories: Necessities (50%), Wants (30%), and Savings & Debt (20%). This method is great for getting a high-level view of your spending habits. It’s also great for giving you a benchmark. Spent too much on necessities last month? Look for opportunities to cut back to get back to the 50% level.
3. The 60% Budget method is like the 50/30/20 method but zeroes in on keeping your necessary spending at the 60% threshold or lower. Debt payments, retirement savings, emergency funds, and fun money make up the remaining 40%. This method can work best if you suspect your household’s spending habits could be a problem.
4. The “Pay Yourself First” Budget is the "You got paid. Now pay yourself" way. This method is great for those who have a hard time building their savings/emergency funds. Start by setting aside the money you wish to save each month. Then, spend the rest of your money as needed. The catch is that you cannot dip into your savings to cover any spending that exceeds what you budgeted for.
You’ve likely tried one or two of these budgeting strategies. If they didn’t work for you, it may be that they weren’t the right fit for the way you work. That’s okay! Everyone is different. The important thing is that you find the right tools and strategies that help you reach what you want to achieve. If one didn’t work in the past, try another! Most of all, don’t feel frustrated, budgets are always a work in progress.
Step 4: Choose a Budgeting App
Once you master the fundamentals and pick the best budgeting system, you will need to locate software to help you track and monitor the plan.
Use the right tools! In the past, you had to be a Microsoft Excel wizard, but no more! While Excel remains an excellent option, there are now some excellent options available to make budgeting simple, quick, and easy.
Here are four excellent budgeting options to consider. Don’t just take my word for it: each app has a 4-star rating or better in the Apple App Store and Google Play, as well as 1,000 reviews or more!
1. PocketGuard is a free app that looks for recurring bills and income and subtracts that from your available cash. That way, you have a realistic picture of just how much free cash you have, even if the bills haven’t debited your account yet.
2. Mint is a popular budgeting app that categorizes your spending to then generate alerts if you’re over-budget a particular category or if there any large/suspicious transactions. Designed as your one-stop financial hub, Mint is now part of the Intuit family of products, including TurboTax.
3. Goodbudget is the digital version of the classic envelope system. Unlike PocketGuard or Mint, you need to enter your account information manually, then assign your money to spending categories, known as envelopes. For Envelope System adherents, Goodbudget will feel like a natural step. For newbies, it might be too much manual entry.
4. Personal Capital is an app that takes the budget up a notch to include retirement, mortgages, and other personal loans, as well as expense tracking. The interface is set up like a dashboard featuring clear visuals for each part of your financial picture.
Each of these apps features intuitive, easy-to-use interfaces that produce snapshot visualizations of your spending habits. Budgeting doesn’t need to be a time-consuming process. Check out these apps today to see if one might be right for you!
Takeaway:
- Set SMART Goals for yourself
- Create a budget
- Put a system in place
- Locate an app to track it all.
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