Financial Goals: Best practiceDec 30, 2020
Just like with everything in life, you need a goal to get what you desire, whether it’s to eat a certain number of calories, drink a certain amount of water, or read a given number of books.
However, not a lot of people plan out their financial goals, much less achieve them.
There’s never a great time to set financial goals.
Of course, most of us like to do that at the beginning or the end of a year but it would do you a world of good to keep setting and working on your goals all year long.
Keep in mind, you need to be constantly motivated as you tick items off your list.
In this article, you’ll discover why you need to set financial goals, suggestions on what types of financial goals you can create, and how to achieve your financial goals.
Why Are Financial Goals Important?
Goals provide something that you can focus on. It gives you a springboard that your decisions can be weighed against.
If you are looking to change things in your life, start by setting proper financial goals.
With financial goals, you are motivated to get moving in the direction that makes you financially free, helping to fight off procrastination.
Furthermore, good financial goals give you something to measure against, so you can understand whether you are on track or not. This is why it is important to set financial goals.
One question that you may be asking when it comes to setting financial goals is “What financial goals should I have?” Consider these financial goals as a starting point:
- Create a budget and live by it
- Live below your means
- Pay off credit card debt
- Save for an emergency fund
- Save for retirement
- Develop skills to improve income
- Save for college funding
- Save a deposit/down payment for a home
- Boost your credit score
- Pay off your student loans
- Start growing your money by investing
How To Set Financial Goals
The first step on your financial journey is to set goals and there are three key things to keep in mind with this.
1. Set goals that you can measure: Ensure your goals are broken down into measurable daily, weekly, or monthly actions. You can’t gauge your progress if you can’t measure it. You should state clearly what you want to achieve when you want to achieve it, and how you plan to do this.
2. Set goals that are within your capacity to achieve: Even though your goals should challenge you to get out of your comfort zone, they don’t have to be unattainable or ridiculous. If you find saving £1000 is easy, then make a goal to save £5000. However, setting a goal to save £100,000 is an unrealistic stretch.
3. You need to write down your goals or they are just dreams: You give life to your goals by having them written down. They become more real and give you a nudge to see them fulfilled.
Types of Financial Goals
Short term financial goals
Short term financial goals are set to be achieved within a limited time. They are usually narrow in scope and include things like buying household furniture, home improvements and renovations, car or vacation savings, or paying for a graduate degree. Short term goals allow you to get the best possible handle on your budget, eliminate credit card debt, establish an emergency fund, and save a percentage of your income.
Long term financial goals
Long term financial goals aim to be achieved over a longer period of time and so requires a longer commitment. Examples of long term financial goals include saving for retirement, paying off a mortgage, living debt-free, going on a once-in-a-life trip or getting your kids through college debt-free, you get the gist!
How to Achieve Financial Goals
It’s easy to achieve financial goals. Here are six easy steps to get you there.
Determine the things that matter to you. Inspect and weigh everything, from the pressing to the whimsical.
Prioritise your goals by sorting out the things that are within reach, those that might take some time and those that are based on a long-term strategy.
Apply the SMART goal strategy to write down your goals.
Create a budget that is realistic. Be clear on what comes in and what goes out, then address it with your goals. Setting a budget will help to plug leaks in your finances.
Be accountable. Find someone to discuss these goals with and can give you a reality check and encouragement along the way. A way to do this is by setting joint goals with a partner, family, or even your children.
Track your expenses. With some luck, you will have a handful of leftover money from your realistic, water-tight budget that can help speed up reaching your goal quicker.
Monitor your progress to ensure you are hitting certain benchmarks, and if you aren’t, then review your goals to see what went wrong.- Don’t be afraid to pause or park a goal to address emergency and pressing issues at hand.
It’s a wrap
Setting financial goals is crucial if you want to achieve your life’s vision.
Your dreams and desires look great on paper but will be achievable when you have the financial capability to make them happen.
With financial goals, you can track your progress towards your vision and what a great feeling it is to be able to accomplish one goal and get on to the next.
If you are dreaming of becoming financially free and being able to enjoy the best of life, then you should start setting financial goals today.
Be sure to leverage the advice laid out in this article.
Here’s to setting and achieving amazing financial goals.