How can you create realistic financial goals?

As we continue through Financial Literacy Month, we want to discuss the importance of creating realistic financial goals for yourself. Most Canadians have money-related goals they’d like to achieve, but sometimes it’s hard to know where to start, or if it’s even possible to accomplish what they have in mind. Realistic goals are all about examining your specific situation and deciding what you think you can do to improve it. As with everything else in finance, there’s no one-size-fits-all approach, but here are some basic tips to get you started!

Calculate your income and expenses truthfully

Realistic financial goals have to be built on a truthful foundation of your finances. No matter what goals you want to achieve, you won’t be able to if you don’t base them on reality. Before you set any goals, take a look at your average monthly income and expenses. How much are you making? How much do you consistently owe in mortgage or rent payments, utilities, gas, groceries, etc? Plus, what else do you spend money on? This might include takeout dinners, nights out, and shopping. Once you have a good grasp on your finances, you can decide if you want to work on saving up, investing, buying a home, or any other objective you have in mind. It’s best to know before you start whether your goal is actually possible to attain with your current situation, or if you need to make any changes.

Create short and long-term goals

Many of our goals take time to achieve, which likely means there are several steps involved. For example, if your goal is to buy a home, you don’t just wake up one morning and move into a new house! That particular goal is divided into smaller steps, which is a great strategy for all your aims. Chop it up into manageable chunks that will reduce your stress and give you chances to acknowledge your progress. Let’s go back to the goal of homeownership. One of your first “mini goals” might be to meet with a broker to discuss your current financial situation. From there, you will want to check your credit score, look at your savings, apply for a pre-approval, and so on. The entire process looks overwhelming as a whole, so it’s important to divide it up into little bites to prevent you from extreme stress.

Mark your progress

You won’t know how your goals are progressing if you’re not checking in with them! Performing a monthly or weekly check-in is a great way to measure your progress. For instance, perhaps you’re aiming to save a down payment for a home. Every month, you should examine how much money you have contributed to your savings account for this goal. If it’s lower than you’re aiming for, this might mean it’s an opportunity to reevaluate either your goal or your behaviours. If all looks as it should, you can congratulate yourself and keep on going with your current strategy. If you need extra help figuring out how to organize your money, using budgeting apps can be super helpful. Apps like Mint, Goodbudget, and You Need a Budget (YNAB) are all popular options for people looking for money management guidance.

Make your goals match you

It’s easy to compare ourselves to others and be judgemental about our own progress. It’s natural to think we should earn more money, own a home, buy a new car, or start home renovations because one of our friends or family members is doing it. It’s important to remember that your circumstances are not the same as anyone else’s, so you shouldn’t compare your personal goals to your friend’s, for example. Realistic financial goals should match your situation. Think about what YOU want to achieve. If buying a new home isn’t on your radar, for instance, don’t think it should be just because someone else your age is looking to purchase. There’s no point bending over backwards and changing your entire financial lifestyle for something that doesn’t fit your circumstances!

Don’t overshoot

Finally, realistic financial goals need to be, well, realistic. The best way of meeting your goals is to not overshoot. Instead of reaching the moon, you might find yourself in a crash landing. This goes in hand with the importance of setting smaller goals. For example, you might not want to make it a goal to buy a home within the next year if you haven’t started saving a down payment, or you have major student loans to pay off. To avoid disappointment and stress, try to be as realistic as you can. It’s okay to set little goals, and to take your time accomplishing a “huge” milestone like a home purchase. It’s better to slowly work your way towards a goal so you can comfortably manage it, rather than rushing and finding yourself in financial trouble.

Creating realistic financial goals is often easier said than done. Usually, setting goals requires us to sit down and determine what we want to achieve, and then work backwards to figure out what we need to do to accomplish it. There’s certainly a lot of work involved with our finances. If your goals revolve around homeownership, contacting a broker might be a great first step! Meeting with a broker helps you see what your next steps should be in your specific situation.

If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.