This article first appeared at U.S. News and World Report Money.
All of us have financial dreams.
We’d like to be completely free from debt. We’d like to retire early. We’d like to be able to build our dream home. We’d like to be able to pay for our children’s college education at a top school. We’d like to open our own shop.
The challenging part is transforming those financial dreams into financial goals. Taking something so enormous and so nebulous and turning it into something that you can actually achieve in a specific time frame is hard. It’s not easy for anyone, even the people that achieve their goals.
Regardless of your specific goal, however, there are a few things you can do that will drastically increase your chances of success.
Create a detailed but flexible plan. How exactly are you going to get from where you’re at to where you want to be? What is the timeframe you desire for achieving that goal? What do you have to achieve each year to make it? Each month?
Your plan for achieving your goal should involve clear answers to all of those questions. At the same time, it should allow for some flexibility, as you never quite know what the future will hold for you. Naturally, major life changes might upend a financial goal, but many goals are actually ended by minor life issues.
Your entire plan shouldn’t fall apart if you struggle to make one step of the plan. Instead, your plan should flex a little bit to account for that.
Add a healthy dose of reality to that plan. How do you add that kind of flexibility? The best thing you can do is to make sure that your plan is actually based in reality.
Quite often, people establish savings goals or other goals that are simply outside the realm of what can easily be achieved. A person who is struggling with a paycheck-to-paycheck existence isn’t suddenly going to be debt free in a year, for example.
Instead, look at what you can realistically pull off. If you are setting a goal for debt freedom in five years, can you realistically come up with 1/60th of that amount this month? If your goal isn’t realistic in shorter timeframes, it won’t be realistic in longer timeframes.
Set milestones. In fact, focusing on shorter timeframes is a powerful way to achieve a financial goal.
Let’s say your goal is to save $50,000 for seed money for a business. Rather than setting such a large number as your goal after, say, five years, break it down into smaller milestones. Your goal is to save $10,000 this year. Your goal is to save $800 this month. You need to save $175 this week.
When you break your goal down into small pieces with milestones, the day-to-day actions you need to take to achieve those goals becomes clearer. It is much more obvious how to save $175 this week than how to save $50,000 over the next five years.
Automate it. Once you have your goal broken down into small milestones, automate the entire plan. Set up a automatic savings transfer at your bank that transfers $175 per week to a savings account.
Doing this serves two purposes. First, it locks you into a plan that moves you toward your goal without having to make active decisions along the way. Second, it puts you in a position where your focus is on dealing with how to live after making room for your goal, not trying to decide whether to make room for it.
Automating a goal means putting it first in your life.
Keep it out of easy reach. Once your saving begins, it can be very tempting to tap into that money for other purposes. Don’t make it easy to tap into that money. You should not be able to access your savings via an ATM card, for example.
There should be no impulsive way for you to access that money immediately, because impulsive decisions will do nothing but undermine your goal.
My suggestion is to save your money in a remote financial institution. The decision whether to use a savings account at a bank or an investment account at an investment house is up to you, but your savings for your goal shouldn’t be sitting in a place where you can grab it at a whim. That’s what an emergency fund is for.
Taken together, these steps can help guide you toward almost any financial goal you can imagine. All that’s needed is the dream and the commitment.