Money management is about using what is had to get what is wanted – goals. No one can have everything, but good management can help get the things wanted most. Choosing a goal that is personally important helps motivate to work to reach it. Don’t be afraid to set goals that aren’t easy. After all, the purpose of setting goals is to accomplish more with money now than in the past.
People always are more willing to help if they’ve been involved in the decisions. Adults, teens and children all can be involved in discussions about what is most important to the family instead of only the adults making that determination. The possibility of achieving goals increases tremendously when everyone is involved.
Most people have goals that are important to them now and other goals important for the future. Financial experts put goals into three categories for the amount of time it will take to reach them or when the money will be available: short-term, intermediate and long-term. All three categories of goals aren’t necessary – even some financial experts use only short-term and long-term goals. Don’t get hung up on categorizing goals, but do what makes the most sense. Just remember to think of more immediate needs and wants as well as those in the future. Big-ticket goals that cost more money, such as a comfortable retirement or children’s education, may be possible only by working toward them for many years. Setting benchmarks helps attain those goals, such as having a certain amount saved for retirement in five years, in 10 years and in 20 years.
Gathering information about costs and debts can help when setting goals. Knowing the amount of debt, loans and payments owed can help when deciding if debt reduction should be an important financial goal. It also helps to ask questions about savings, like how much is saved and if it is enough. Evaluating goals and writing them down also helps achieve those goals.
Sometimes goals clearly are unrealistic. For example, a family with a monthly income of $3,000 and spending $2,900 a month on basic living expenses would find it unrealistic to save $500 a month for various goals. Unreachable goals may lead to discouragement and giving up. Make sure goals are at least possible even if it’s a stretch to reach them.
If goals seem unrealistic, change them. If someone saves $10,000 a year for retirement, but decides it isn’t possible, perhaps he or she can adjust the goal and save $5,000 a year instead. If a student wants to pay off student loans in two years but decides it’s unrealistic, he or she could decide to pay them off in four years. Revise goals by writing them again with specific target dates and dollar amounts.
Writing down a commitment to continue with goals can be useful, but usually people begin down the road to financial security with a desire to increase their savings or reduce their debt. Always ask: How much is saved? How much debt is being paid?
Most people have many goals. It’s important to work hardest on the goals that are the most important. For example, with five goals, rank them from one through five. Or divide goals into three groups: highest importance, medium importance and lower priority. Short-term goals are targeted sooner than long-term goals, but that doesn’t mean they are more important. More than one goal can be worked on at a time, but it’s a good idea to be clear about the highest priorities.
To help track progress toward paying down a debt, visit the Web at http://paydowndebt.unl.edu.
SOURCE: Kathleen M. Prochaska-Cue, Ph.D., family economic specialist
