Setting a financial Goal
If you want to purchase a new car, climb Everest, or retire on a boat, there’s one definite way to fail.
Follow your instincts. lack goals and a plan. You may depend on a guardian angel or good fortune to get you through.
Okay, we’re joking. If you want to wing it, I wish you luck.
Achieving your financial goals requires planning. You can help yourself with it, or you can get help from a certified counselor. You need to have a SMART plan, regardless of the strategy you choose (Specific, Measurable, Achievable, Relevant, and Timely).
It is feasible. Here’s how.
Financial Goals: What Are They?
“I’m just waiting for my ship to come in,” as the expression goes. Financial objectives resemble little ships. These are spending, investment, or savings goals you want to reach within a certain time frame.
What kind of objective you want to accomplish typically depends on what stage of life you’re in. For example, having a sufficient retirement income is not a major concern for high school students. Their short-term objectives include earning enough cash to purchase a secondhand automobile or a pair of Air Jordan sneakers.
A person with a growing family might have longer-term objectives, such as paying for their children’s college tuition or purchasing a home.
Financial Goal Types
When you need to achieve a particular objective, it will determine how to set it. Those timelines are really straightforward.
- short-term objectives. These are for comparatively modest items, such as purchasing a computer or television, funding a trip, or creating an emergency fund, and they may be reached within a year.
- intermediate objectives. These can be completed quickly, but they frequently take five years or more. Examples include saving for a down payment on a home and repaying debts or credit cards.
- long-range objectives. Reaching these takes a lot longer than five years. These include things like supporting a retirement plan and repaying college loans or a mortgage.
Financial Goal Examples
To alleviate financial strain, think about adhering to these ten objectives.
1. Pay off your credit card debt.
When it comes to financial wellness, credit cards are like icebergs on the Titanic. The annual interest rates might be anywhere from a few hundred to several thousand dollars. A debt consolidation plan frequently provides a way out of the credit card debt quagmire. A counselor can explain how such a plan works and help you decide if it’s right for you.
2. Put money aside for retirement.
Instead of living in poverty as you age, you want to live in luxury. This suggests that you need to figure out how much you will need and put away money every month in order to grow your investment portfolio. At 85, it’s better than nothing, but it’s not as exciting as buying a brand-new car right now.
3. Put money aside for education.
The average cost of attending college was $35,551 per year in 2020. It’s costly, but it’s usually rewarding if you get a good degree. People who only have a high school diploma typically earn 66% less than those who have a college degree. A counselor can help you figure out how to pay for education.
4. Create a budget.
Even the most lofty goals are meaningless if they are not grounded in reality. You may better grasp your financial situation by compiling a list of your earnings and expenses. A credit counselor can teach you how to create a budget and come up with a smart plan to achieve your goals.
5. Create an emergency fund.
There’s always a chance of a medical emergency or a financial disaster like losing your job. The emergency fund should be sufficient to cover three months’ worth of regular living expenses, such as housing, food, and transportation.
6. Put money aside for a down payment on a house.
Purchasing a home is almost always a prudent long-term investment, even in the face of the real estate market’s volatility. 20% of the total cost is a reasonable goal and can help you save money on mortgage insurance, even though there are various requirements for the down payment.
7. Boost your credit rating
You will pay less interest when buying a home, a car, or anything else that requires a loan if your credit score is higher. Having a good credit score might save you hundreds of dollars when making a big purchase.
8. Repay your student loans.
The average federal student loan balance in 2022 was $37,358. It is unclear if the courts would provide student loan relief, despite the Biden Administration’s efforts to forgive a significant amount of it. In the meanwhile, refinancing or consolidating student loans are two options to save money on some loans.
9. Launch your company
Starting a business is a difficult but ultimately worthwhile endeavor. Who wouldn’t desire leadership? It is essential to get seed money, create a business strategy, and stick to a monthly budget. The purpose of launching a business is to make money, not to spend it.
10. Take care of yourself.
Let’s face it, discussing most objectives isn’t fun. It helps to have one that seems like a reward, like buying a boat, an 80-inch TV, or going on a vacation. The determination and self-control required to achieve all those other goals are also strengthened when happiness is the goal.
How to Establish Financial Objectives
These six stages can help you create financial goals, whether you do it on your own or with professional help.
- Find out what matters to you. Consider everything on the table, from the practical and pressing to the fantastical and distant.
- Sort the chores into those that can be finished quickly, those that will take some time, and those that will take more time.
- Adopt a SMART strategy. Timely, Relevant, Specific, Measurable, and Achievable are the acronyms for it.
- Create a modest budget. Get a firm grasp on what is coming in and what is going out, then utilize that knowledge to accomplish your goals. Utilize your budget to plug any gaps in your income.
- Hopefully, following your rigorous, realistic, and tight budget, you’ll have some money left over. Regardless of how much it is, have that amount automatically transferred into a different account that is meant to handle the first few things on your list of priorities.
- Monitor your progress. Make sure you are accomplishing your objectives. If not, pause and think about what’s not right.
How to Achieve Your Financial Goals
- Make your goals a top priority in your plan. A closer look will show that some are more costly, while others are more specialized. This allows you to group them into one of three categories.
- In less than a year, short-term financial goals can be achieved. Examples include a vacation, a new refrigerator, or paying off a particular obligation.
- Mid-term financial goals can’t be attained right now, but they shouldn’t take too long. Examples include paying off credit card debt, obtaining a degree or other certification, or purchasing a car.
- It may take many years to accomplish long-term financial goals (those that extend beyond five years), requiring greater time and often more resources. Examples might include having a comfortable retirement, buying or paying off a house, or investing for a child’s college tuition.
This process comprises identifying the goals you want to achieve, estimating the financial and material resources needed, and planning the time needed to achieve the goals.
Create a Goal Chart
A smart place to start is by creating a chart of financial goals.
The following five steps will assist you in making your target chart:
- Write out one personal financial goal. It should be specific, action-oriented, measurable, realistic, and have a deadline.
- After deciding on a short-, mid-, or long-term goal, create a timeline for it. This might change at any time based on your situation.
- By the month or year, divide the entire amount of money needed to reach your goal.
- Think about all the ways you can accomplish that goal. Include saving money, cutting back on expenses, earning extra money, or finding additional resources.
- Choose and document the combination of tactics that will help you reach your goal.
All of that may seem daunting, so the best course of action is to set tiny goals. Establish objectives and then achieve them.
After accomplishing some of the easier goals, you gain confidence in your decision-making. That should motivate you to achieve the more difficult objectives that need greater self-control and persistence.
The Advantages of Establishing Financial Objectives
If you have no goals, your journey to financial security is likely to take a different route.
Allen Wohlwend, a St. Petersburg, Florida-based financial planner, claims that “anyone who walks through the door if they don’t have some financial goals and if they have failed to plan, it’s like the saying goes, they are probably planning to fail.” “Those individuals who plan ahead, have a clear idea of what they want to do with their money, implement their plan, and develop positive habits are the best.”
Consequently, there are golden guidelines. The guidelines aren’t absolute, though, because the procedure involves some guesswork.
Who can predict what the next three decades will hold? Who can predict what will occur the next week?
The economy has been in a precarious situation. Those who are most prepared and intelligent make the best estimations.
“What happens if things change?” Wohlwend said. It’s crucial to take into account more than just the amount while setting your financial goals. It’s the process itself. It’s cultivating constructive habits. If you save consistently, you’ve put yourself in a successful position.
Tools and Guidance for Goal-Setting
You can remain up to date with the aid of goal-tracking apps. If you’re not technical, traditional methods can be helpful. If you are successful, picture yourself in retirement like that by placing a picture of yourself at the beach or another beautiful place on the door of your refrigerator.
