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By the author of What School Should Have Taught You and The Faithful Prepper.
Benjamin Franklin is known for having said if you fail to plan, you plan to fail. That is very much the case within the world of personal finance. You have to develop financial goals. If you don’t take an invested interest in figuring out where you are right now, how much you have, what you can make on a monthly basis, what your debts are, and where you want to be, you’re going to have a hard time getting out of any financial ruts that you have fallen into.
You have to make a plan.
Crafting a budget is a huge part of this, yes, but it’s a component. The act of making goals is something separate – something larger. It is the forest. The budget is the trees.
Are you in debt right now? The odds are, yes. According to one study, the average American is $90,000 in debt. Other studies say that number is lower (around $50,000 per American), but the point is that there are a lot of Americans living under the yoke of debt.
Approximately 77% of us, to be precise.
I think one of the most important things about this is not to become a fatalist about this.
I hate fatalism. Don’t get beat to the conclusion that debt is a normal part of life that you have to go through. It’s not, and there are things you can do to dig yourself out of it.
Sit down and figure out what is a possible timeframe by which you and your family could get out of debt. Is it possible – through sacrifice, hard work, and daily drive – to get your family completely out of debt over the course of the next five years?
Let’s say you are the average American with $50,000 in debt.
Twelve months per year x 5 years = 60 months that you have to work with.
If we take that $50,000 and divide it by 60, that means we would need $833/month for the next five years to make this a reality.
Let’s be honest: that’s a lot of money.
But it’s through looking through the math of these different situations that we’re better able to come up with concrete, actionable goals for ourselves and our families. Even if you look at that above figure and come to the conclusion, “Well, that’s not going to happen,” at least you now have a benchmark to work from.
You now know that it would take an additional $833/month to be out of debt by the end of five years. And while you may not be able to make that happen, are there steps you can take that will at least help you to reach that goal?
Can you sell one of your family’s vehicles, netting a cool $4000? Can you cancel two or three streaming services? Can you work one overtime shift per month? Let’s say you do so. You get $200 for your overtime shift and at least $500/year for your streaming services.
Your overall debt is $46,000 after the Honda Civic has been sold, and you’ve just put an additional $2900/year in your pocket from a few changes in your family’s work and spending patterns. If you looked at your budget before and thought that only $300/month was what you could put towards your debt, you’ve now made it so that instead of paying everything off in 14 years, you can now pay off everything in seven years.
You’ve just halved the amount of time it will take your family to be free from debt, but it took a hard look at the numbers and the creation of financial goals to get you there.
And so, I highly encourage you to take a hard look at your own family debt to do the same.
What can you spare per month for your debts? What can you sell right now to help you hack your way to freedom sooner? When can you pick up an extra shift or gig? What expenses can you slash? How can you make your necessary monthly expenses cheaper?
These are all questions that you need to ask yourself right now. And if you can do that, you’ll have a good grasp on what your financial goals are for getting out of debt.
- I want to get completely out of debt in 5 years
- My goal is to pick up one extra shift per month.
- I am going to sell off the unused pieces of the home gym and the second lawnmower.
- My goal is to cut all streaming services completely.
- My goal is to spend $50 less on groceries per month.
That will give you a good idea of how to create your own goal list.
If you make the goals, you have something to shoot for. You then know what you need to do to succeed. And if you don’t? Well, in that case, you’re planning to fail.
And that is something that neither you nor I want for you.
But what are your thoughts? Any helpful hints on creating financial goals? Do you think they work? Let us know in the comments below.
Aden Tate is a regular contributor to TheOrganicPrepper.com and TheFrugalite.com. Aden runs a micro-farm where he raises dairy goats, a pig, honeybees, meat chickens, laying chickens, tomatoes, mushrooms, and greens. Aden has four published books, What School Should Have Taught You, The Faithful Prepper, An Arm and a Leg, The Prepper’s Guide to Post-Disaster Communications, and Zombie Choices. You can find his podcast The Last American on Preppers’ Broadcasting Network.