1.5.2 Video: Budgeting to reach your goals
Segment 1 - Why Is It Important to Set Goals?:
If you want to travel to a place that you have never visited before, you need a good map. It's the same with your finances. To manage your money well, you need to know where you want to go. That means setting financial goals. Being without them is like being lost in the woods without a compass - we have no direction and can't find our way out.
There are certain things in life that are really important to us, but take a lot of money – for example ensuring your child has access to the education and training they need for the career they want. [cutaway to university shots], taking a vacation [travel agency] or having enough funds to enjoy your retirement.
For most people, expenses like this can't be paid on the spot, and setting aside a large sum of money takes some time. But it isn't enough simply to identify a general aim – knowing that you want to go on vacation is a start, but the goal doesn't tell you how much it will cost, how long you have to get the money, or how you will save for it. How will you know when you have reached the goal? If you don't know these details, you won't know if you're heading towards your goal, or if you have to change your strategy in order to reach it.
Segment 2 - Introduction to SMART:
SMART goals make it easier for you to plan how to save for the goal, how to measure your progress, how long you have to work towards it, and how to know when we have reached your goal.
Segment 3 - A SMART Example:
Instead of just "I want to save for a vacation," a SMART goal would be to say "I want to save $5,000 for a trip to New York, within ten months."
- It's specific – because you know exactly what you're saving for - a trip to New York
- It's measurable – because you know how much you will need - $5000
- It's achievable– because you can break the total needed into smaller steps and you will know how much you need to put aside each week or at each pay-cheque.
- It's realistic – because you can see if you need to adjust your budget or your goal to make it work.
- And, finally, it's time-framed, because you've set a deadline – "I want to be standing in Times Square in 10 months' time!"
Segment 4 - Real World Application:
Let's look at how you might go about setting a SMART goal for your vacation to New York.
- First [Step 1: Set monthly amount] divide the total amount you need, by the number of months you have. In this case, $5,000 over 10 months = $500 per month.
- Then, [Step 2: Fit into your budget] add this amount to your monthly budget, taking into account your other necessary expenses, and your monthly income.
- [Step 3: Adjust your budget – or your goals] See if you have enough income to meet your total monthly budget needs. If not, you'll have to either increase your income, reduce your other expenses, reduce your vacation budget, or give yourself more time to save for the vacation.
Segment 6 – Summary:
We all have ambitions and objectives that we work towards, and…
- Setting realistic, achievable financial goals is one of the most important factors in reaching them.
- Working towards very specific financial goals is easier than working towards vague or general ones.
- Knowing how to set goals and budget for them requires a bit of forethought and planning, but this is easy to do and can lead to huge benefits later on.
Segment 7 - Actor's concluding statement.
Setting SMART goals can make it easier for you to reach your financial goals – this can mean the difference between success and failure. Take a moment to consider your objectives, and set SMART goals to help you to stay on track and make your dreams a reality.
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