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 work on setting financial goals in this article, and see if we can make your long-term plans more achievable!
What Are Good Financial Goals?
Let’s keep this simple. After all, it’s not a complicated concept. A financial goal is simply any goal you’ve set that helps you with saving, making, or investing money. These goals are usually influenced by what stage of your life you’re currently in. Events like marriage or having kids can completely change the goals you have!
A good financial goal is simply one that follows the SMART goal setting system – and one that is actually realistic for you to achieve. It’s clearly important to aim high and do your best, but don’t set goals that you have absolutely no hope of achieving. For example, if you make $3,000 per month, don’t make a goal to save $2,900 per month. On the opposite end of the spectrum, don’t make your goals frivolous and easy. Saving $30 per month out of $3,000 isn’t generally something to write home about.
Why Should You Set Financial Goals?
As I said earlier, financial goals help you focus and get where you want to be. On top of that, with personal finance it seems that those who don’t set goals fall into bad habits. So, to keep on track, you need to constantly set something for you to work towards. If you don’t, you may let something like lifestyle creep work its way in and ruin your financial security. These goals and good financial habits will help you grow your wealth, and can save you in a recession.
Good Ideas For Financial Goals
There are a myriad of great financial goals to set. You’re the best person to figure out your own goals and decide where you want to be. If you need some help brainstorming, here are a handful of ideas to get you started.
Budget
A good financial goal would be to start building a budget and complete it by the beginning of next month. Over the following months you can always tweak and adjust it as needed. For those who need help designing a basic budget, check out my article for beginners. For a far more intense, advanced budgeting system, try out a zero-based budget. If you already have a budget, do an audit and see if you’re missing anything important.
Live Below Your Means
Another good place to start, and related to budgeting, is living below your means. Hopefully you do this already, but if you don’t it’s a great challenge to tackle. You’ll never have financial freedom if you can’t save and invest money consistently. Clearly, you can’t save or invest anything if you’re losing money constantly. So, make it a priority to get this in check or to just cut expenses in general.
Don’t Have Credit Card Debt
Credit cards have multiple uses and can be a great financial tool. In fact, in some of my major financial tips I even recommend using one. However, if you carry a balance and go into debt with one it can be devastating. Credit cards tend to have incredibly high interest rates and can make it next to impossible to escape debt once you’re in it. So, to be clear, the goal is to stay out of debt completely, and to not have to pay it off.
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.
Retirement Investments
You need to start investing for your retirement as early as possible. Retirement planning should start now, with no more delay. How you go about it is ultimately up to you, as there are many options these days. If you’re aggressive and save a lot of money, you may even be able to retire early.
Increase Your Income
This is one that may be easier said than done, but it’s perfectly within your grasp. It’s easier now than ever before to make a six figure salary, all it takes it a good work ethic and tenacity. If you need to, take the time to learn some new skills. Whatever you make now, make a goal to increase your income by a certain date, to a reasonable amount. You may have to decide if you’ll need to leave your current position to reach that goal!
Pay Off College Debt
College debt is lower interest than credit card debt (usually), so it’s not as much of a priority. Also, student loans help you open up a lot of doors, so I won’t naysay anyone who went into debt for a good education and a strong degree. However, it’s important to pay off your student loans and be as debt free as possible – excluding your mortgage. So, pick the method that works for you, and start knocking the debt out.
Build Your Credit Score
Most people are confused about credit scores, but they don’t need to be. If you follow generally good financial habits, you should be able to build a good credit score fairly quickly. To get even more information on your credit, and how to build it, check out my guide.
Save Up For A Down Payment
If you’re tired of renting and want to buy a home, it’s a good idea to have a decent amount of money set aside for a down payment. How much it is and how long you’ll need to save are up to you and what you can afford. If you need more information on the process behind buying your first home, check out my article.
How To Set Financial Goals
So, we have the basics behind financial goals and their utility down. Now, let’s get into how you can set proper financial goals that help you get and stay on track!
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.
Long-Term Financial Goals
These goals are your main overarching driving force. They’re essentially where you want to end up or what you want have at the end (or much closer to the end). For example, being set up for your retirement may be a good long-term goal. On the shorter side these goals are probably a few years out. On the longer side these could be a decade (or decades) away. Remember, even though they’re a long ways away, use the SMART goal system to help you set them. Long-term goals help you set other goals, and making them detailed is a great way to have a good roadmap to where you want to be.
Medium-Term Financial Goals
Here, aim for goals that you should be able to reach within 1-3 years. There a ways out, for sure, but you can still see them on the horizon. Good examples include saving up for a large purchase, starting an emergency fund, and getting a promotion or raise.
Short-Term Financial Goals
Short-term financial goals should be achievable relatively fast. It may take a month to get them done, or as much as a year. Either way, it’s something you’re actively working towards and should be able to accomplish soon. It could be something like creating a budget or cutting certain expenses.
Track Your Financial Goals
Below, you’ll see a spreadsheet I made for setting your financial goals. If you want to use it, save the image below, or sign up for my newsletter and I’ll send out a free copy in my welcome email! As a bonus, the welcome email even includes a budgeting template. If you don’t like this pre-made sheet, I encourage you to make your own or customize it in the way that best suits you. If you don’t want to use a tracker, no worries – use whatever system helps you keep track of everything.
Resources
- Personal Capital has a ton of free financial tools that can help make your life easier.
- Mint is one of the best budgeting apps I have seen recently.
- Betterment is another great app, where you can create funds for different expenses you’re saving for. Think along the lines of vacations, cars, furniture, or new appliances.
- Again, Axos has an amazing savings account.
- For beginners, Acorns can get you to start saving consistently and helps you learn how to invest.
- M1 Finance is one of my favorite brokerages, and investing with them is easy. Alternatively, Vanguard is another great option.
- If you want to learn how to invest in index funds and ETFs and get started today, check out my guide.
Conclusion
If you don’t start now, your financial goals will get farther and farther away, and get harder to reach. Set goals now, get serious about your personal finances, and start saving! If you have any tips to share, feel free to leave them in the comments. We’d also love to hear personal stories – about successes or failures in your own personal finance journey.
