Tuesday, April 18, 2006

Setting financial targets and giving yourself economic goals

Until quite recently I had been opposed to do the above, I figured that I was financially savvy enough to be able to know what to buy what to aim for and when not to buy something without really setting anything in stone. Well, I was wrong.

I'm not talking about giving yourself a 10 year goal or even a yearly goal (although I would recommend that too) I am talking about a month to month or even a week to week goal (maybe even a day to day if you are spending too much on your breaks at work for example).

So how do you go about it?

First thing you need to do is evaluate a month (or a week if that is how you are going to do it), take a notepad everywhere you go and note down everything you buy, you need to do it practically as you buy it otherwise you will forget bits and pieces. Keep the receipts so you can refer to your notepad, staple them in if you prefer to do it that way. Every evening go back and look over your notepad and do a total for the day, now go back over the day and do a total for the essential things (e.g. petrol, food, cloathes etc). You now have two totals and with a little mathematical genius you can have three totals;
  • Total money spent in one day
  • Total money spent on essentials in one day
  • Total money spent on luxuries in one day

Build this notepad up until you have a week, evaluate your week and do the same thing. Great! Now you don't have to do a lot more work to set yourself a target for next week. Just shave a bit from the luxuries column and next week keep track again and see if you can beat it, with a target in mind you will more than likely do it!

It doesn't stop there

You may think next week when you beat your target, job done! No not job done, I reakon that you can have four weeks at least (if you set your targets reasonably) of target setting before you are somewhere near.

Your essentials, ok so you put it in the essentials column, did it deserve to be there, if it did is there a cheaper alternative. Your targets then for the essentials column could be as follows;

  • Can you take £10 (or $10 as the case may be) off the cost of food.
  • Can you save £15 petrol by sharing lifts with a colleague or catching a bus.
  • Did I NEED that buy two get one free cake offer, especially as I only ate one and the other two went out of date!

Since starting to set short term targets I have been very motivated towards reaching my goal. I have always set long term goals but now setting these short term goals I find that I am getting closer to my long term goals much faster than previously.

A few random tips to do with targets;

  • Put a chart on your wall, colour a bit in each time you get closer to it.
  • Keep a table of your weekly outgoings and put it on your fridge.
  • Calculate your targets, everything you save is somethinearnednt, put 75% towards investments/savings or another useful cause, use the other 25% to take yourself and your partner out to dinner.
  • Write it down.
  • Share your targets with friends and family, make joint targets and help to motivate each other.

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