How to set financial goals and stick to them: a comprehensive guide

32.2% of Australian households have $5,000 or less in their savings. And 1 in 6, alarmingly, have less than $1,000. Should an emergency arise, not many people are in a place to comfortably cover the costs.

Setting financial goals is a powerful step towards achieving financial security, independence, and peace of mind. However, sticking to those goals can be challenging without the right strategies.

Step 1: Define your financial goals clearly

This may sound obvious but goals need to be clearly defined from the start. ‘Unclear, unrealistic, or poorly timed goals can result in frustration and failure (Clough et al., 2021).’

Actionable tips:

  1. Make goals specific and measurable: Instead of saying, “I want to save money,” reframe it as “I will save $5,000 for a holiday by 31 December.”
  2. You can break this up into short-term, medium and long-term goals.

Step 2: Assess your current financial situation

When you understand your spending habits, you’re less likely to act on impulse and more likely to make deliberate choices, so you can use awareness as a superpower to help make a change.

Actionable tips:

  1. Track your income and expenses.
  2. Use apps or spreadsheets to get a clear picture of where your money is going.
  3. Identify spending patterns
  4. Highlight areas where you can cut back, such as dining out or subscription services. You may have forgotten that you’ve signed up for that monthly app that you never use!
  5. Know your net worth.
  6. Subtract your liabilities from your assets to understand your financial starting point.

Step 3: Break goals into manageable steps

It’s important to recognise your micro-wins and celebrate small victories along the way. Each success boosts motivation and reinforces the habit of saving. That’s why it’s vital to break your bigger goals into smaller steps.

Why not pair your progress with non-financial rewards, like enjoying a relaxing day off or treating yourself to something small but meaningful? That way, you’re telling your mind that you’re on the right track, and you will feel incentivised.

Actionable tips:

  1. Create milestones
  2. Divide larger goals into smaller, achievable steps. For example, saving $5,000 could mean setting aside $416 per month.
  3. Automate savings
  4. Set up automatic transfers to a savings account to make progress without relying on willpower.

Step 4: Develop a budget aligned with your goals

Practice moving from a scarcity mindset to an abundance mindset. Shift your thinking from ‘I can’t spend money’ to ‘I’m choosing to invest in my future.’ This reframing makes budgeting feel empowering rather than restrictive.

Actionable tips:

  1. Use the 50/30/20 rule
  2. Allocate 50% of your income to needs, 30% to wants, and 20% to savings and debt repayment.
  3. Prioritise high-impact areas
  4. Focus on reducing high-interest debt and building an emergency fund first.

Step 5: Stay accountable and motivated

Tell someone! Once you declare your intentions to others, you’re more likely to follow through to avoid cognitive dissonance.

Actionable tips:

  1. Find an accountability partner
  2. Share your goals with someone who will encourage and support you.
  3. Track progress regularly
  4. Review your goals monthly to adjust your strategies as needed.

Step 6: Overcome psychological barriers

It’s paramount that you practise self-compassion. Treat yourself kindly when setbacks occur. This reduces stress and helps you stay committed.

You may also like to strengthen your delayed gratification skill by practising small acts of restraint, like waiting an extra day before making a purchase.

Actionable tips:

  1. Procrastination: Break tasks into 5-minute actions. For example, start by opening a savings account.
  2. Fear of failure: Reframe mistakes as learning opportunities and adjust your plan rather than giving up.
  3. Impatience: Practise mindfulness to stay present and focus on the process rather than instant results.

It’s also important to regularly revisit and adjust your goals. You may choose to do this monthly, quarterly, six-monthly and/or yearly. Don’t forget to do so when your circumstances change, as well.

Setting and sticking to financial goals is a journey, not a destination. By integrating Piteo Accounting & Advisory’s mindful approach with the above strategies, you can stay focused, motivated, and empowered. Remember, the key to success is consistency and self-compassion. Start small, stay committed, and watch your financial dreams become reality.

Disclaimer: It is important to seek the advice of a qualified professional before making any financial or accounting decisions. Each individual’s financial situation is unique, and not all information provided may be relevant to your specific circumstances.

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