It’s quite natural to become confused when you start thinking about setting up your financial goals. It is not only setting up the goals, but you must also balance them according to your lifestyle and budget plan.
For some people, their prime life goals are living a luxurious life with a big house and an expensive car. Some people may believe in savings, so they target retirement savings as their life goal.
For others, investing in various sectors to increase net worth might be a prime life goal. Owning a business or having enough financial security might be a preferable life goal for a few others.
It is up to you, how do you visualize your priorities and life goals. You must consider what you want in the future and set your big life goals to align with your values. Make sure you keep enough space for small life goals as you set up your future goals.
Why is it important to set up financial goals?
Setting up goals can give you something to focus on, and help you to stay motivated on the path of financial success. Saving money and planning for a secure financial future is difficult. You need to sacrifice a lot to gain success.
You need to control your spending habits and avoid most things that you want you to want to buy. Apart from that, you may have to work harder to earn extra income. You need a strong and clear reason for those sacrifices, that’s why you must set up big and small financial goals to achieve big things in your future.
These are some of the great benefits of setting up life goals:
- Having life goals can improve your performance. If you set up specific, logical, and measurable goals for your future, you are more likely to achieve them.
- Setting up goals may also set up the standard for satisfaction. Once you’ve set a goal, you’ll become happy at that point when you achieve that goal practically. Your happiness will be defined by your accomplishment of the goal.
- Setting up specific goals may keep you focused. When you set up a goal, you may render your full attention to fulfill that goal. It will also help you to shift your focus away from other non-productive things.
- When you have a goal set, you’ll be excited about it and it will energize you to achieve it. You want to be proactive so that you can work hard and move forward to fulfill your goal.
- Once you set up a goal, you need to track your progress continuously until you reach success. Tracking your progress is required to measure your work and to determine how much you still need to achieve them.
- Setting up life goals is quite motivational. You’ll work harder to achieve the specific goals that you’ve set. Without a strong target, it is quite difficult to accomplish financial success in life.
- Goal-setting may reduce the probability of failure. When you have a strong specific goal, you’ll try harder to fulfill it at any cost. This enthusiasm will help you to persist until you achieve what you planned.
What are the most common financial goals?
If you are still confused about financial goals, here are some common examples of financial goals for you:
- Pay off your overall debts– Getting rid of your unsecured consumer debts should be your prime life goal. These may include credit card debt, medical debt, personal loans, payday loans, medical bills, etc. You should follow the steps to be debt-free in one year, two years, five years, or 10 years, depending on how much you owe.
- Saving for a mortgage down payment – If you want to buy a new home, then save as much as possible to pay for mortgage down payment. It’s the most significant purchase and investment of your life. You may have to provide 20% of the total price down initially to avoid PMI (private mortgage insurance).
- Saving an emergency fund – Three months of liquidity is a minimum standard of an emergency fund. If you can make it up to six months (or more), that’s much better.
- Saving for college for your kids – According to the U.S. Department of Education, college graduates with a bachelor’s degree practically get 66% more from their jobs than students with only a high-school diploma. So, if you don’t want your kids to be tangled with student loans, set a goal to save for their college education.
- Improve your credit score – To get good offers while buying a home or getting any kind of loan, you’ll require a good credit score. So, it is one of the most important life goals that you need to take care of. A good credit score is a key to financial success.
- Save for vacation – You might set a goal to save up a good amount to cover your big vacation. This way it won’t hurt your emergency fund or your monthly budget at all. But you might have to reduce your expenses a bit to achieve that goal.
- Saving for retirement – This is the final and the ultimate financial goal of everyone’s’ life. Set up a goal and save a pre-calculated amount each month into your retirement fund. You may also max out your 401(k) or IRA each year, or to save 15% of your monthly income.
How to set financial life goals?
Here are the steps to setting financial goals:
- Prioritize your thoughts. Consider everything while deciding on life goals.
- Do proper planning to sort out what’s within your reach. Your financial goals should be specific, measurable, action-oriented, realistic and should have a timeline.
- Decide if your goal is short-term, mid-term, or long-term, and create a timeline for that goal. This may change at any time based on your situation.
- You need to track your money so you can be assured that you are putting enough toward each financial goal.
- Think of all the ways you can reach that goal. Include saving, cutting expenses, earning extra money, or finding additional resources.
- Maintain separate savings accounts for each different financial goal you set. When you are saving for retirement, you may opt for a 401(k) or IRA to get the tax breaks. But for other savings goals, you may open high-yield savings account with a reasonable interest rate.
- Monitor your progress. You should check regularly if possible, or at least once a month. This way you can make sure that you are fulfilling the objectives and are on track for achieving your financial life goals.
