No matter the current state of your personal finances, you always need good financial goals to work towards. Good, specific goals make it easier to get where you want to be and help you keep moving forward. As you knock out one goal, it’s important to set another so that you can keep your momentum going. Now, you may have a lot on your plate and think your long-term goals are miles away, but you may be surprised. Let’s take a look at 10 crucial financial goals and see how they can be achieved!
Setting And Reaching Your Financial Goals
Personally, I love setting SMART goals. For those of you who don’t know, SMART goals are Specific, Measurable, Attainable, Relevant, and Time-Bound. You want to be as specific and concrete with your goals as possible. It should be very easy to tell when you have achieved the goal, and it should be fairly easy to know how to start working towards your goal. Making sure your goal is specific and measurable will help you stay on track and know when you need to do something to get back on the right track if you’ve encountered a setback.
It’s important for any goal you set to be realistic and something you can actually hope to achieve, at least in the time you’ve given yourself to do it. In other words, try to set your goals high so that you have something to work hard towards, but don’t set them so high that you have no hope of getting there. While you want the goal to be time-bound – so it’s specific and measurable – make sure it’s an attainable timeline.
Lastly, make sure your goals are relevant. There is no point in setting a financial goal if it doesn’t get you closer to where you want to be in the long run.
It’s Not Hard
Okay, it may be hard, but your financial goals probably aren’t as hard to reach as you think. The key here is figuring out what they are (in this case, I’ve laid out 10 crucial ones you’ll probably want to do). Beyond that, you also need to stay consistent. Without consistency, your financial goals will fall apart. As long as you keep your eyes on the prize, stay disciplined, and keep trucking along – you’ll end up where you want to be.
1. Create An Emergency Fund
I’m a huge advocate for emergency funds. Start off by setting a deadline to save 1 month worth of your household expenses. Then save up 3 months worth of expenses. Keep doing that until you have at least 6 months worth of expenses saved up. If you have a volatile career or business, you may even decide to save up more than that. For the best results, put your emergency fund in a high-yield savings account, like the one Axos has.
2. Get Rid Of Pesky Debt
Eliminating pesky, high-interest debt is one of the best uses of your money. Think of it this way, eliminating debt is a guaranteed return. As a general rule of thumb, I consider anything with an interest rate over 5% too high and an absolute emergency to take care of. Some people may disagree with that, but that’s my personal line. Avoid taking on new debt (that is part of what emergency funds are for) and tackle your existing debt with the best method that works for you.
Again, the biggest caveat here is that you need to stay disciplined and be consistent to eliminate all of your debt. It probably will take a good deal of time, so don’t expect overnight success. Take your small victories and eagerly wait for the day when all of your major debt is gone!
3. Meet Your Retirement Minimums
If you want to actually retire at some point, then you need to set minimum retirement investment goals and start reaching them every month. The best way to get started with this is by taking advantage of tax-advantaged retirement accounts. For example, a 401(k) is a great start. There is a cap on how much you can contribute annually, but usually your focus is simply on reaching the amount your employer will match.
In a traditional 401k, your contributions are deducted from your taxable income. This means that your contributions are made tax-free, but you will have to pay tax on them when you withdraw them in retirement. This can be a good thing since a lot of people will be in a lower bracket when they retire. However, it is always unknown how policies and taxes will change in the future, so you can never be completely sure how it will turn out.
An IRA is another type of tax-advantaged investment account. There is a cap on how much you can contribute annually, which you’ll ideally reach.
Roth IRAs use contributions that have already been taxed. While that seems unfortunate now, it does mean you won’t have to pay taxes on them later on, which could turn out in your favor (but it could also work against you too). The main issue for Roth IRAs is that they have an income cap, so once you make over a certain amount you can’t contribute to it anymore.
4. Own A Home
Buying instead of renting can save a lot of money if you plan on being in the same location for several years. So, if it’s time to put down roots, start working towards buying a house. There are a lot of complications with that, but you can read more about it here. One of your top priorities should be to find a good real estate agent you can trust!
5. Invest In Yourself
There are tons of great careers out there – with or without a degree – but they all require advanced skills. It’s your job to take the time to learn new skills and hone them so that you can become a valuable asset. This can help you in your career, but it can also help you if you decide to start a business. You’d be surprised at how much you can accomplish when you take the time to develop a valuable skillset. So, do yourself a favor and make the best type of investment – one in yourself.
6. Create Another Source Of Income
Creating several sources of income will take your financial security to the next level. In fact, it’s also one of the best indicators for wealth too. You don’t need to go crazy and work until you drop. It’s okay to get creative with it and have some fun, as long as you bring in some additional income for your household. I’ve written numerous articles on this topic, from lucrative side hustles to ways you can make money online. Find one or two ideas you like and run with them.
Your extra sources of income aren’t limited to side hustles like consulting either. Cash flow from something like rental properties still counts! So, focus on building up a few sources of income for your household. The goal is to be able to live off of one, and for the others to help you exponentially increase how much you can regularly invest. Also, if you lose your main source of income, those additional sources can soften the blow and even keep you afloat until you can get back on your feet.
7. End The Over The Top Spending
I understand that it can seem like a daunting task at first, but cutting your spending and creating a budget isn’t that hard – especially if you keep it simple. The main thing you need to focus on is spending less than you make. Once you have that down, everything else will become much easier! So, if you don’t already have a budget, get to it. You can use my complete guide to make it even simpler to start.
Naturally, the point of the budget is to stick to it. So make a budget that helps you reach your financial goals, but one that is also realistic for you to stick to. A budget is pointless if there is no way for you to adhere to it!
8. Set Up For Early Retirement
Early retirement can be rough, but if you’ve hit some of these other crucial goals, then you’re well on your way. Start ramping up to save 50% of your income or more. I’m well aware that investing 50% of your income isn’t feasible for most households. With that being said, if you’re able to invest 50% of your income, then you’re actually well on the road to retiring early! This puts you way ahead of schedule and gives you a lot more flexibility with what you want to do with your future. Again, I know this isn’t feasible for everyone, but it’s a worthwhile goal to try to achieve, especially if you want to retire early.
9. Improve Your Credit Score
Good credit scores can help you get bigger loans with lower interest rates. It is nothing but a boon for your finances, and it isn’t particularly hard to maintain a good credit score. As long as you practice normal, healthy financial habits, then you should be set. If you want more information on how to start building credit, or just need a breakdown of how it’s calculated, check out my guide on credit scores.
10. Share The Wealth
Donating to those less fortunate or non-profit organizations can be incredibly rewarding. It could be a lot or a little – however much you’re comfortable with – but start considering it at least! It can make a huge difference.
Conclusion
Hopefully this gave you 10 crucial financial goals to start working towards. Remember, enjoy the process and share any tips or thoughts you have in the comments!
For more content like this, and a free budgeting template and financial goals worksheet, be sure to sign up for the Bitter to Richer newsletter.
