When you set financial goals, it will help you create a big picture of your current financial situation and the path you want to take to become financially secured. You will learn how to prioritize your expenses, savings, and where your earnings should go. Also, you will have the opportunity to evaluate which things are important to you.
Financial goals are your targeted objectives that require funds. These goals can be short-term or long-term, and will determine how you are going to spend and save money. This can be overwhelming, especially for the first-timers who will just set their financial goals.
Here are some simple tips on how to set your financial goals.
What are your financial goals?
You may start by visualizing and listing down where you want to be financially in the future, and the reason WHY you are striving to reach those goals.
For example, you want to earn $15,000 monthly working on your startup because you want to be your own boss and enjoy life.
No matter how impossible your goals may sound, you must list down all of those. It is also important that you include your reasons for your WHYs as this will be your compass if you get lost along the way because of the obstacles you are going to encounter.
Here are some good financial goals that can be your priority:
1. Spend less than your income.
2. Grow your emergency fund.
3. Pay off your debts, completely.
4. Save for your retirement.
5. Save for your children’s education.
6. Keep multiple investment accounts.
7. Start your own business.
Achieving your financial goals.
Short-term financial goals are those immediate expenses that you want to achieve in a range from one month to 2 years.
Example: Purchasing of household items, saving for your travel, payment for loans and credits and building your emergency fund.
Long-term financial goals involve more money than your short-term goals. It usually takes 5 years or more to achieve.
Example: Saving for retirement, opening a gold IRA, paying off mortgage, saving for your startup, and saving for your child’s education.
Whether you are setting for your short-term financial goals or long-term financial goals, effective financial goal setting should follow a SMART methodology: Specific, Measurable, Attainable, Realistic, and Time-bound.
- Specific – should be clear on what you want to achieve financially. Example: I want to save to buy a new laptop for my freelance work.
- Measurable – should have metrics on how you are going to measure your progress. Example: I aim to save $640 so I can buy a new laptop.
- Attainable – what you can do to make your goal achievable and attainable. Example: I will reach my $640 goal by saving $80 every week.
- Realistic – your goal should be realistically achievable given with your set of resources. Example: I can commute to work instead of driving to save money to buy a new laptop.
- Time-bound – your goal should have a start and finish date, and you stick with your schedule. Example: Every day, I will save $16 so that I will reach my $640 goal within 2 months.
Your goals can change as we do not have much control over what will happen to our lives. We may get caught into a sticky situation and we may need to reevaluate our financial goals. Don’t be disheartened if this happens. It’s okay to make changes and update your financial goal strategy. Whatever you do today whether it’s big or small will have a positive impact on achieving your financial goals.
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Achieving your financial goals.
Short-term financial goals are those immediate expenses that you want to achieve in a range from one month to 2 years.
Example: Purchasing of household items, saving for your travel, payment for loans and credits and building your emergency fund.
Long-term financial goals involve more money than your short-term goals. It usually takes 5 years or more to achieve.
Example: Saving for retirement, paying off mortgage, saving for your startup, and saving for your child’s education.
Whether you are setting for your short-term financial goals or long-term financial goals, effective financial goal setting should follow a SMART methodology: Specific, Measurable, Attainable, Realistic, and Time-bound.
- Specific – should be clear on what you want to achieve financially. Example: I want to save to buy a new laptop for my freelance work.
- Measurable – should have metrics on how you are going to measure your progress. Example: I aim to save $640 so I can buy a new laptop.
- Attainable – what you can do to make your goal achievable and attainable. Example: I will reach my $640 goal by saving $80 every week.
- Realistic – your goal should be realistically achievable given with your set of resources. Example: I can commute to work instead of driving to save money to buy a new laptop.
- Time-bound – your goal should have a start and finish date, and you stick with your schedule. Example: Every day, I will save $16 so that I will reach my $640 goal within 2 months.
Your goals can change as we do not have much control over what will happen to our lives. We may get caught into a sticky situation and we may need to reevaluate our financial goals. Don’t be disheartened if this happens. It’s okay to make changes and update your financial goal strategy. Whatever you do today whether it’s big or small will have a positive impact on achieving your financial goals.
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