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Creating Goals for Your Financial Success

[Apr 16, 2008.]


Going on a trip without a road map is the surest way to get lost, so why don't we apply the same logic to our financial goals? When it comes to rebuilding your credit, you need to have some sort of plan in place to help you get to where you want to go in terms of your credit score and overall debt balance. Here are some steps that you can take to create a plan for your success:

  • Write down what you need to pay off – While this might be painful to calculate, it will help you to find out the exact number that you need to pay off. Into this total place anything that you need to pay off: credit card balances, loans, fees, etc.

  • Estimate what you will pay each month towards this balance – try to come up with an amount of money that you will put toward your balance each month. This number may fluctuate, but it will give you an idea of how long your debt may take to pay off.

  • Subtract this amount from the debt total over the course of the year – While interest rates may keep the overall debt amount from diminishing as quickly as this will seem, having an idea of how quickly your debt will go down is a great motivator.

  • Look at the individual amounts to see which ones you want to pay off first – Create a system that will work for you. Some people like to pay off the smallest amount loans so that they're out of the way, while others like to pay off the highest interest loans first. Create a plan of attack for your loans to have a measure of accomplishment with each new debt gone.

  • Write out your financial dreams – When you stop to consider your life, what kinds of things are you unable to do because of your debt right now? Are you unable to buy a house? Are you unable to buy a new car? Write out all of the things that you want to do with your money and it will keep you on track towards paying off the debts that are standing in your way.

A good system of goal setting is generally referred to as SMART. This stands for Specific, Measurable, Attainable, Realistic, and Time Based.

You need to choose specific goals that you want to reach (i.e. pay off debt in three years), measurable (i.e. keep a chart of your goals and how you've paid them off each month), attainable (i.e. you probably don’t want to base your debt payments on winning the lottery), realistic (i.e. if you don’t make a lot of money, it’s not realistic to say that you will pay a lot of money toward your debt each month, and time based (i.e. create a time period for each debt).

Once you have these goals written out, be sure to refer to it often to see how your progress is going. While it might not seem like a lot at first, each payment you make is getting you closer to your goals and closer to a credit score that you can be proud of.


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