Goals: Set Them

This post and the next few to follow will be collateral to material I’ve already covered. We’ll move to Phase 3 after you’ve had some time to work on and in your budget. Remember, I’ve said several times that your budget will often be a work in progress. This does not mean that you will be making radical changes to it on a whim. It means that as you claim more control over your finances you will “tweak” it to become ever more effective in reaching your goals.
In an earlier post I suggested 3 goals that many people use a budget to achieve. They were:
1. Getting debt free
2. Saving up six months of money for emergencies
3. Putting away ten percent of our pay for the long term (frequently this means
towards retirement)

You may have other goals in mind—extensive renovation of your home, for example. Regardless, all major goals have one thing in common. They require a lot of funding. To avoid debt, we have to plan for them and allocate ourselves “partial payment” of the total cost over a period of time.

A major element in goal setting is the understanding of priorities. Of course, the funds required for living (housing, food, etc.) are going to be allocated first, but even the amount of money you assign these categories is influenced by things like credit card and loan payments. I realize some of your debt may be tied to the very categories I just mentioned, especially housing. It also ties you to your house and pleasant as your home (or say, your car) may be, owing on it can limit your ability to make beneficial changes. —Debt is a big deal. If debt reduction is (or needs to be) a priority of your budget, do give it all the attention (funding) you can. The sooner debt is paid off the more freedom you have to live more fully.
That same reasoning holds true for saving. I know I’ve brought up two goals that involve building a cash reserve. Do it. At least put something away regularly. Even if your major goal is to get out of debt. It disheartening, at the least, to pay and pay. —To make progress only to backslide because life “threw you a curve ball.” You may not be able to have separate funding for emergencies and savings right away, but it growing reserve needs to be a priority. It gives you growing control over your life.
After you have your basic priorities covered look at other things to accomplish. Determine which of them are real needs or soon to become needs (versus wants). Funding for these becomes a priority, a goal. Again, if it is early in your life on a budget, the funds for these goals should be incorporated into your emergency/ savings reserve and as you accumulate money to cover their expense you may want to seriously consider the wisdom between going ahead and using the funds and waiting for your reserve to build more. Legitimate choice—that is control of your money.