[MUSIC] So far in this module we've been talking about dreaming big and thinking about all the possibilities the things that you can do. We've also talked about being aware of the influences that affect our spending and saving behaviors in our financial planning. The next step in financial planning is really to turn our dreams into reality by making them into financial goals. So let's take a look at what that means and how we can do that. There's some real advantages to writing financial goals. One, it helps us create specific action steps out of those big dreams and make them much more doable. It lets us measure our progress over time because of some of our big dreams really are going to take a while. And we want to know, are we getting there, are we making progress and taking steps in the right direction. And interesting enough, research also shows that if you write down your goals and you make them specific. That you're much more likely to achieve them than somebody who just sort of wanders around thinking, I think I might like I'd like to do something like this. So there's some real advantage to taking that time and writing out your goals especially your financial goals. So we have a little method to help us do that and we could them Smart Goals. And smart goals helps us remember that we want them to be specific, we want them to be something that we've narrowed down and that we can really think about it that way. We also want them to be measurable and sometimes that means that we have to do a little research in order to figure out, what would that cost or what would it take to do it. We may need to have that goal be agreed upon if you live in, if you have a relationship with somebody else where you're sharing finances. It's much more effective if you can agree on the goals that you're working towards and have everybody kind of buy into that. And then you may want to make sure that they're realistic. Although we want to dream big and have a lot of big ideas, we also don't want to set ourselves up for failure. So we want to put them into a mode that'll make it workable for us. And then it's just I think human nature, putting a deadline on something really does help us and so we want them timed. So let's take a look at what a smart goal might look like. Let's say that you'd like to have a car and you decide that you want to save up some money before you go out and purchase that car. And you estimate that by the time you go and pay for the licensing and the fees and have a little bit to put towards the car, you're going to need at least $2,000 to get started. You plan to put the rest of the cost of the car into a loan but you do want to have some money saved up before you start. So a smart goal that would represent this might be, I want to save $2,000 towards buying a used car in five months. If you notice it's specific, it says that you want to buy a car, it might be even be more specific if you could say what kind of car you wanted to buy. It's measurable, we're estimating a $2,000 for this goal. Agreed upon, well in this situation maybe you don't have to worry about. Having an agreement with somebody else could something you're going to do yourself. Realistic, let's come back to that, and timed, five months. Okay, so we got specific, we've got a timed, and let's look at this piece, is it realistic? For most of us, when we think about large sums of money, and $2,000 can be a large sum of money. It's kind of hard to think about where would I find $2,000 in all my daily spending and things like that. So unless we already have it sitting somewhere, where would you find it? So what we can do to check if it's realistic is we can break it down. We can say, okay, I want $2,000 in 5 months. Well, that's about $400 a month, maybe approximately $95 a week. Now it's easier to think about, where would I find $95 a week? Could I work a little more, could I cutback some other area, is this manageable for me? If $95 a week doesn't sound realistic, then you have a chance to modify your goal, to tweak it. For example, maybe you would like to say, what if I took me eight months to save it up? Then the cost to save is closer to $57 a week, that might just work a little better in your life. Another option would be to decide to buy a less expensive car, and not have to save up so much. So by making it realistic and breaking it down, we can really make that decision of, is this a good smart goal for me, and can I do this? Now this is an example of a short term financial goal, but it's something that's going to be done in the near future. And typically, we talk about goals and short term as being something within five years. But a lot, as I mentioned earlier if our goals and dreams might take longer and then they would be what we call a long term financial goal. So let's take a look at what some of those might be looked like. Let's say somebody wanted to save for a home down payment. That's a typical long term goal and they needed $7500 they estimated and they decided that they wanted to do that in about four years. Again that $7500 amount, I mean that would be very hard to just say I'm going to just pick this up from somewhere and find it. But if you break it down to how much you have to spend a month and all the way down to $36 a week. Then it sounds like maybe a very manageable goal and not such just a dream but now a goal. Paying off college loans, something that a lot of young adults are looking at. Typically, in the US, ten years is a very common number for how long it takes people to pay those off and let's say that somebody had, they owed $27,870. Amount would be with interest and everything. It would cost them about $232 a month or $52 a week to pay that off in 10 years. Somebody might look at that and say wow $52 a week I could actually do more than that and just get that principal paid down faster. So I really do think that it helps to write out goals so they're specific and then check if they're realistic. Put a date on them, divide it out and see if that's something that you can do. Writing financial goals doesn't always have to have a dollar amount. Sometimes it's a test that helps you move towards understanding your finances or look exploring options but you might want to add them to your financial list. So for example, calculating your net worth maybe something that you want to do and again, having that deadline can help you achieve it. Writing financial goals can really give you direction in your money management and in your life and help you get towards the things you want. Those are sort of like a road map that you can refer to overtime. So I suggest that you begin to keep a running list of your financial goals, both short term and long term, and see how that helps you. [MUSIC]
