The very first thing you need to do before you even think about creating a budget is to figure out your WHY. Why do you care so much about getting a budget? What do you hope to achieve? Sounds really cliche but I promise you that it is WORTH IT to take the time to sit down and figure these things out.
Finding Your Financial “WHY”
First thing I want you to do is think short-term. What financial goal would you like to reach within the next year? Make it something that is realistic and achievable. If you are in six-figures of debt, aiming to be “debt-free” in a year probably isn’t going to be realistic (but hey, maybe it is!). Here are some examples:
“I’d like to pay off my $3,000 credit card balance”
“I’d like to pay off my smallest student loan”
“I’d like to have $5,000 in savings”
“I’d like to take my spouse on a weekend getaway
When I started my journey back in March 2017, my short-term goal was to get $1,000 in savings. It was realistic, straight-forward and an actionable baby step.
My current short-term goal is to pay off my smallest student loan, which is currently around $900.
Using a Five Year Plan
Okay, now that we’ve dipped our toes into financial goal setting, now I want you to think five year. Who do you want to be in 5 years? What kind of life do you hope to lead? Where would you like to be financially? My five year financial goals are:
Be completely debt-free by 30 years old
Have our house fully renovated
Have traveled internationally extensively
Be working a job that I love and is more flexible than teaching
Be able to give and surprise others generously
Think of being debt-free. Think of owning a home. Think of owning your car. Think of paying in cash for vacations. Think of making six-figures. Think of giving generously. Think of where you could be in just 5 years time. Now, you have a job. GO WRITE THIS DOWN. I revisit my financial goals- including my five year plan- every moth when I do my budget. It reminds me of why I’m cutting back in certain areas or why I’m throwing so much money at debt instead of eating out.
Find Your Big Goal
Okay, one last thing. Use your short-term goal and your five year plan to find your THING. By now, you should have a pretty sturdy idea of what you need to do in order to get to where you want to be in five years. For me, I know my big goal is that I want to be debt-free. Maybe your why is that you want to have $20,000 in savings. You want to have a down payment for a house. You want to be out of credit card debt. You want to pay for your kid’s college. What is your goal? Tell me in the comments!