Financial Goals – Concept, Importance, Types, How to Achieve, Set-up Process & more
As the new year has come, we are all set to some fantastic financial goals. Basically, financial goals are just monetary goals you strive hard to achieve.
It can be anything like saving for a wedding or reducing the student loan debt. Money drives almost all the decisions which we make every day. For it we do plan Financial Goal.
Thus, when you set goals, you cannot only feel confident but also take control of the findings. Saving money for buying is anything a tale as old as time.
Irrespective of our age, all of us have some or other financial goals. We all try saving something. These goals are surely going to help you buy something, which is outreach right now.
But before deciding on a financial plan, you need to understand why you want to achieve it. How long will it take to manifest and some steps to learn about it?
After you know what is essential, you need to understand what is achievable in the short or long term. Above all, experts say that you must develop SMART goals.
By SMART, we mean the goals must be Specific, Measurable, Achievable, Relevant, and Timely. You can also consider having a tight budget to achieve it.
Lastly, don’t forget to keep track of your success.
Know about Financial Goals
Ideally, financial goals are personal and significant picture goals you set for how you will save and spend money. Hence these are things you plan to achieve in the short term or some down the road.
On the other hand, you can say it is relatively more comfortable for you to reach your goals if you identify them in advance.
In simple terms, you can tell financial goals are investment, savings, or spending goals which you plan to achieve over a period of time.
Usually, the stage of your life determines the type of goals that you plan to achieve. For instance, it might be an easy short-term goal if you are in college, including saving for a new bag.
At the same time, a person who is planning to grow a family will have a long term goal of buying a home.
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Why are Financial Goals important?
You need financial goals to help you in shaping up your future by encouraging the actions you take now. For instance, if you have, your goal is to pay some credit card bill.
Then you can cut down on your outings and use the money to save and make extra payments. You are most likely to continue spending as usual while your debt grows up without having any goal.
Just like your expense, you can also include your financial goals in your budget. By doing it, you can take some decisive steps towards reaching your goals.
Then you can leave some space for some other expenses. You can plan out how much time it takes to get each objective.
Also, you need to calculate how much money you need to invest within the goal period. Hence you can track progress when you identify goals and create a realistic plan.
When it comes to becoming financially secure, then setting short term, midterm, and long term goal is essential.
You are most likely to spend a lot more than you need if you fail to work on something. Additionally, you will fall short of money when the unseen situations arise.
It is quite possible for you to get into the mess of the vicious debt cycle, and you can also feel vulnerable than ever when it comes to handling risk.
Hence, you can say when you plan finances annually; you get a chance to see your success and review your goals if needed.
When you compare your progress from the previous year, you can quickly check if there are any changes that are essential.
The planning period gives you an opportunity to set some goal if it’s your first time. Hence you can stay firm on financial footing.
Experts say that people who have some financial goals are ideally golden because they have something to look forward to.
Types of Financial Goals
If you want to achieve your financial goals, then you must give them priority by making a plan. After making a plan, you will discover that some are broad term goals, while others are narrow.
You can put your goals under three categories that are:
Short Term Goals
You can achieve these financial goals within a year. These goals not only give your confidence a boost but also the foundational knowledge, which helps you in achieving larger goals.
These steps are relatively easy to achieve. For instance, you can’t build $2 million for your retirement overnight.
But you can indeed sit down calmly, jot down a strategy, and create a budget. You need to keep track of your expenses, or else it might just slip down your hands.
Also, experts suggest that you must create an emergency fund to pay for unexpected costs. You can either open a savings account or save funds through decluttering or organizing.
These goals are not only narrow in scope but also have a limited time horizon. It can include buying some home furnishing items.
Here again, you need to start getting serious about not spending unnecessarily.
You can’t achieve these goals in a blink of an eye for sure, but indeed it won’t take like years to complete them.
It is an ideal time to start working towards your mid- term goals after creating a budget or establishing a fund.
The main agenda of these goals is to bridge the gap between your long term and short term goals. It can be anything from getting your life insurance to paying off your debts.
It can also include some personal goals like buying a house or going on a holiday. You can say this is a barbell approach as we weigh the financial plans around the near and long-term objectives.
One of the critical midterm goals is to develop multiple income streams. Also, you can meet some financial advisors to build a midterm strategy.
Long Term Goals
These goals take a lot of time to accomplish, so it needs more commitments and finances also. One of the most important long term goals for people is to save money for their post-retirement life.
Experts suggest that you must keep at least 10 to 15% of your paycheck if you want to live comfortably post-retirement. Some of the other long term goals include paying off your mortgage.
Hence, under the goal setting process is all about deciding what goals you wish to accomplish.
You can also assume the amount of money that you need. Additionally, you can plan how long it takes to reach your objectives.
Step by Step Process to achieve Financial Goals
Types of Financial Goals you can have to better your Financial position –
Prepare a Monthly Budget
You might think that it is an easy goal, but it is one of the most critical steps in keeping your finances under control.
Additionally, you can see a significant improvement in your finance if you write your budget every month.
Hence when you register an account, you can see how better you can handle it.
Track your Daily Expenses
When you choose to keep a note of every penny you spend, you will really understand where your money goes.
Even if you don’t want to write everything on a piece of paper, you can consider using a smartphone app.
You can enter all the expenses and track your budget. By doing so, you can understand your strengths and weakness.
Lastly, you will also know where you need to make changes so that you spend in limit and reach your goal quickly.
Stick to your Budget
No doubt, this is one of the most challenging tasks to do, but you can easily stick to your account if you carefully track it.
You must be spending less than your income and put some money in savings in simple terms. You are most likely to reach your financial goals in no time if you stick to your budget.
Start Paying off your Debts
Choose to make a particular goal on how much you plan to get rid of the deficit this year. If it is feasible, then you must try and pay off all your debts, so you don’t have any tension in the next year.
But it mainly depends on your income and the existing debt. After setting a goal, you can consider calculating how much money you need this year.
Above all, when you follow the debt payment plan, you can quickly pay off the debt.
Avoid adding any more Debt
If you are serious about getting out of debt, then you can’t take this goal lightly. If you are ready to buy a new house, then this goal is exceptional for you.
In simple terms, we can say is that you must stop using your credit cards, or your debts will pile up.
You can indeed plan the purchases ahead if you can commit that you will not borrow money any longer. Thus by this, you will surely make a dent in the debt amount.
Start Planning for your Retirement
You can start saving for your retirement only once you are done with paying off your debts. Then you can contribute at least 15% of your income to your retirement fund.
Minimize your Spending
Irrespective of your financial situation, and it is always advisable to save as much as you can.
It is mainly because when you minimize your spending, you can easily contribute the same towards your long term financial goals.
You can choose any one category and decide to work on it continuously to meet your goals. Above all, if you choose to cut down on your spending you can quickly put them into your savings.
How to set Financial Goals?
Here are Step by Step Process to teach you about Setting up your Financial Goals –
- Firstly you need to understand what matters to you. You need to put everything on the table to weigh and inspect, from practical to distant elements.
- Then understand what is in your reach and what isn’t. Sort out things that you can place into a long term strategy.
- Don’t forget to apply the SMART goal strategy.
- Above all, please create a budget that is realistic. Keep track of things that are coming in and going out. You can also use your budget to check some leaks under the financial ship.
- If you are lucky, then you can see some left out money even in the tight water budget. Irrespective of the amount, you can consider transferring it to a different account to address the under priority things.
- Above all, experts suggest that you must keep track of your progress. You need to ensure that you meet some benchmarks. If you fail to do so, then you must revamp your goals.
Financial Goals – Conclusion
When it comes to achieving financial goals, it is not possible to make linear progress continuously. You need to know that perfect financial planning begins with goal setting.
Your dreams can either be short term, long term, or medium term. Above all, remember that luck has nothing to do with reaching a goal or financial independence.
All you need is a sound financial plan and strategy to achieve them. After you establish the program, you can work towards these goals. These goals will undoubtedly influence your future.
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