Personal Finance / Unit 2: Budgeting
2.6 Setting Financial Goals
Notes
Goals give a budget a purpose. Strong goals are SMART: specific, measurable, achievable, relevant and time-bound.
- Short-term goals take under a year, medium-term one to five years, and long-term goals take longer (such as retirement).
- Pay yourself first: move savings out of each paycheck before you spend the rest.
- Divide the goal by the time to find the monthly amount.
- Example: save $1,800 in 9 months needs $\displaystyle \frac{1800}{9} = 200$, so $200 per month.
Practice
Which goal is the most SMART?
It is specific, measurable, achievable and has a deadline.
To save $2,400 in 12 months, how much must be saved each month?
$\displaystyle \frac{2400}{12} = 200$.
What does "pay yourself first" mean?
Saving first makes saving automatic rather than leftover.
Ready for more? Take the Unit 2 test.