The Difference Between Money Reality and Financial Goals

When you look at where your finances are now, you probably see the gap between your financial reality and your financial dream. In many cases, it might seem as though it will be impossible to bridge that gap and create a new financial reality that encompasses your dreams. The good news is that it’s not impossible. In fact, if you follow the steps outlined below, you could be well on your way to creating your ideal financial reality.

Break Down Big Goals

One of the factors that makes your goals seem so unattainable is the sheer grandiosity of them. But when you break these large goals down into smaller goals that can be attained in intervals, they are much easier to both visualize and achieve.

Let’s say your goal is to buy a house. To break this down into smaller goals, you can:

  • Set a goal to save the downpayment by a certain date
  • Set a goal to start saving the difference between your rent now and your mortgage, insurance, and property tax payments once you buy
  • Set a goal to improve your credit rating, so you get a better interest rate

Let’s look at another example. Say your goal is to pay off $25,000 in student loan debt. You can break this down into the following smaller goals:

  • Start living according to a budget
  • In that budget, set aside 10 percent of your income for student loan repayment
  • Pay off 10 percent of your loan balance this year, 20 percent of the balance next year, and so on

Create Steps for Accomplishing Smaller Goals

Once you’ve determined what the small goals are, you need to come up with a plan for accomplishing each of them. Using an example from above, let’s say you want to save for the downpayment on a house. Your steps toward doing so might be:

  • Save $500 a month
  • Sell any unused vehicles, electronics or other expensive items and put the money toward the downpayment savings
  • Get a part-time job during the holiday season and save your paychecks toward your downpayment

Through the creation of smaller goals and steps to take toward making them a reality, you will create a viable plan for reaching your financial ideals, and you’ll have built-in measures for accountability that keep you on track.