Does it ever feel like no matter how much you earn you always seem to spend the majority of your money? You work hard but your finances never seem to change. If you’re ready to get off the financial rollercoaster it’s time to set financial goals.
Before choosing a financial goal its good to get clear on what you want out of your life. Working toward a goal that adds value to your life will help you take action and stay motivated. Your financial plans should be based around financial goals that are important to you.
If your goal is to travel around the world for the next 10 years and retire on an island; saving for a car won’t be a priority. On the other hand, being debt-free and having funds in the bank for travel would be a priority.
If you were to look at your life big picture:
- What would your ideal life look like?
- Who and what do you value?
- Is there something that makes you happy?
- What do you want to achieve this year?
- Any habits you want to break?
- What do you want to be better at?
- Are there new things you want to accomplish?
- Any new places you want to go to?
- What do you want to learn?
It’s easy to read over those questions without really answering them. If you’re not 100% sure where you see yourself big picture or don’t know where to start, do yourself a favor and write down the answer to the above questions on a piece of paper or even in notes on your phone.
To give you an idea of financial goals you can set for yourself I’ve created a list of financial goals. I’ve broken them down into six different categories.
List of top financial goals:
1. Money Management
One of the first financial goals many people set is to get their personal finances in order. You may be ready to create a budget, start living below your means, track your spending and/or reduce your expenses. Maybe it’s time to improve your credit score, start tracking your net worth, create a will and trust and/or get a term life insurance policy. Or perhaps you just want to learn the in’s and out’s of using a credit card wisely, learn how to travel hack, improve your financial literacy by reading a personal finance book or contribute to charity. Overall, money management can keep your everyday financial stress to a minimum and set you up for success.
2. Earn more money
One of the best financial goals you can work towards is earning more money. You can earn more money by building additional streams of income, creating passive income, creating a side business such as starting a blog or a youtube channel or negotiating your salary. Determine how you’ll earn more money and set your plan into action.
Not all debt is bad debt but when it is you want to work to pay it off quickly. Your financial goals might be to pay off a credit card, pay off your mortgage, pay off student loans or pay off your car. Paying off debt is not always fun and can sometimes come at the expense of other financial goals. Stay focused and create a budget or debt management plan to pay it off.
Saving money and having it on hand can keep you from acquiring more debt but also give you a sense of financial security and peace of mind. Your financial goal for saving could be to save 10-15% of your gross income, save for travel, save for a wedding or to build an emergency fund (3-6 months). You might even be ready to start saving for a down payment on a house or contribute to a 529 for your kids. To reach your savings goals make sure to automate your savings.
It’s important you spend some time educating yourself and learn how to invest. It can be intimidating if you’ve never done it before but I promise you, anyone can learn. Keep it simple in the beginning. Everyone has a different level of risk their comfortable with. You can start by investing in an index fund, stocks/bonds, real estate, a whole life insurance policy or most importantly invest in yourself.
It’s never too early or too late to start saving for retirement. Start a retirement account if you haven’t already. If you have a retirement account think about increasing your contributions, funding another account or preparing to save for early retirement. If you’re a stay at home mom read this post; how to save for retirement as a stay at home mom.
How to achieve your financial goals
Take a look at the financial goals you want to tackle first. Based on the resources you have and the length of time it will take you to achieve them, you’ll need to create a plan to accomplish them. There are three different types of financial goals.
Short-term financial goals will take you a year or less. An example of a short term financial goal is paying off a credit card in less than a year or reducing expenses.
Mid-term financial goals will usually take you more than a year and less than five years. An example of a midterm financial goal is paying off a car loan.
Long-term financial goals will take you five or more years. An example of a long term financial goal is saving for retirement.
Write down your financial goals the S.M.A.R.T. way
Once you’ve narrowed down your financial goals, be specific and write them out. Doing that will make you more likely to succeed than those who have either unwritten goals or no specific goals at all. Writing your goals down will establish good habits and set yourself up for financial success.
Setting challenging but attainable financial goals will promote commitment and motivation. It also increases the chance of you achieving your goals. Your financial goals should be S.M.A.R.T.:
Your financial goal should be simple and easy to understand. They should be well defined and it should be clear what needs to be accomplished. For example, specific would be to pay $100/mo toward the $800 balance on your Visa credit card vs. my goal is to pay off debt.
How will you start and finish your goal? What are the steps in between? The previous example is measurable because you know you have $800 worth of credit card debt that needs to be paid. When the debt is cleared your goal has been achieved.
Your goal should be achievable and not impossible to reach.
The financial goal has to be something you’re capable of achieving based on the time and resources involved. It should be results-based and in line with your big picture goals.
Your goals should be time-based and trackable.
Creating S.M.A.R.T. goals is about connecting your life to your financial goals. Smart goals get you organized by giving you direction. S.M.A.R.T goals take a vague idea and give it direction.
Make yourself accountable
According to Dr. Gail Matthews in her study which focuses on strategies for achieving goals, more than 70% of participants in her study who sent weekly updates to a friend reported successful goal achievement, compared to 35 percent of those who kept their goals to themselves, without writing them down.
Make yourself accountable by finding a way to get feedback on a regular basis. Evaluate your goals by looking at what’s working and what’s not. Setting financial goals is about growing personally and financially. Put your money to work so you can experience the financial freedom you desire.
Big financial goals can be overwhelming. Buying a house or paying off a mound of student loans can seem impossible. It’s easy to become impatient and sabotage yourself when you’re not making progress at lightning speeds. It takes time to get your finances on track, so give it time.
Do you have any tips for achieving your financial goals? Leave them in the comments below.