Top Things To Consider When You Set Financial Goals
Being proactive to set your financial goals is perhaps the most important aspect of ensuring you accomplish them. Yet, while many people understand the importance of financial planning, they often choose to avoid it, viewing it as an overwhelming task.
Fortunately, with a few tips and tricks, financial planning can actually be a very straightforward process. We’ve collected some of our best tips to set financial goals that will help you succeed. Discover what might help you reach new financial heights.
Short-Term vs. Long-Term Goals
How does one define their personal financial goals? Remember that life coaches encourage clients to reduce their goals to writing as the process performs as an effective tool for motivation.
To be successful, one’s financial goals must be measurable and include a place along the continuum of your life. To start, try to set at least three short and long-term goals.
Here are a few concrete examples.
- Pay off your credit card debt within the year.
- Retire at 55, with 1.5 million dollars across a variety of assets, plus a pension.
- Retire in 15 years to Scottsdale, Arizona, with enough money to purchase a home on a golf course and enough income to travel three times per year.
If you find this planning exercise unexpectedly difficult, consider sorting your goals into two primary categories: short-term and long-term objectives.
Short Term Financial Goals
Long-Term Financial Goals
Must-Haves or Needs – goods/services that are required to live/function in society.
Must-Haves or Needs
Wants – goods/services that are not essential but something you desire.
Wants, but Willing to Compromise
Categorizing one’s current and future needs vs. wants will help determine those expenses that can be reduced/eliminated when saving for future goals. In some instances, it may be necessary to cut back on spending for those expenses that some deem a necessary expense.
Note: Studies have shown that those who set a financial goal and proactively commit to following a saving plan are more likely to reach their goals.
Allocate for an Emergency Fund
An emergency fund is an essential aspect of every financial plan. These funds should be set aside and only used for those moments when unexpected circumstances occur, like a pandemic or a job loss. Many financial gurus encourage consumers to maintain at least six months of expenses in a liquid asset (like cash or a savings account) to be ready for an emergency, but some people feel more comfortable with at least one year of expenses in savings.
Consider Your Entertainment Budget
It is important for savers not to feel deprived, so set aside a reasonable amount of money for hobbies or other entertainment. A limit often helps you stay within a defined maximum spending limit and still enjoy your life!
Fund Long-term Goals
A portion of your savings should be allocated towards longer-term objectives. The amount required will remain dependent on the actual goals, the future expenses, and the age of the saver.
Where to Find Help Online
The Consumer Financial Protection Bureau (CFPB) offers a variety of resources to help consumers save. It’s also a wise idea to enlist the help of a financial advisor. Registered financial professionals have access to robust financial planning software for advisors that can help you make the most of your money, and their advice based on years of experience could make all the difference in reaching your financial goals.
Reaching short- and long-term financial goals requires planning, time & dedication. However, maintaining a consistent stream of savings—even if only a small contribution—will allow you, as the saver to take advantage of the value time offers money revealed by compounding interest.
Your future begins today; the time to save is now!