Financial goals can be long-term, short-term or intermediate goals. They form the basis of every good financial plan. While many people have a rough idea or have dreams of where they want to be financially in life when they grow old, they have no idea how to get there.
A large part of this comes from not understanding how to set realistic goals that align with your personal values, circumstances, and objectives.
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Financial goals are not the same as a financial budget. They can, however, form a part of your financial plan. For this reason, setting the right financial goals requires a good level of financial literacy. If you want to achieve your money goals, you need to first understand the basics of finance and money. This includes things like learning how to create a budget, how taxes work, investments in their various forms, and so on. 🙂
Once you have the basics down, you can customize your monetary goals around your lifestyle, making them easier to set and achieve. But if you feel like you don’t know where to start in terms of financial goals or feel confused as to how they can fit in within your budget, this article is for you. I will give you a foundation to start with. You can then develop the goals as you progress and describe your entire financial situation.
Further reading: Money Management for Women
What are Financial Goals?
The term financial goals refers to specific monetary targets that you set over a particular period of time. You are committed to achieving these goals or objectives within that period. In essence, these goals set out your vision for your future.
As with any goal, the financial goals you have should be aligned with your long-term plans. For example, if you are someone who wants to have kids, you will want to start saving up now to put them through school.
Further reading: The Best Influential Money Lessons From My Mom 🙂
A good financial goal is detailed and thorough. Having vague goals never pushes you to work toward a definite path. For instance, a bad way to define your financial goal is: “I want to raise my credit score”. Even if you write this goal down and take full responsibility to achieve it, you will very likely struggle with where to even start. You also wouldn’t know when you might be able to achieve it.
Instead, you should find a way of setting your financial goals in a way that defines all of their aspects. This is where the concept of SMART goals come in. Let’s have a look.
SMART goals are defined as follows:
- Specific
- Measurable
- Attainable
- Relevant
- Time-bound
Taking the above example, you might modify a financial goal by applying the SMART method to look something like: “Improving my current credit score by 25 points over the next 1 year”. This way, you have a SMART financial goal that can be tracked and measured. Consequently, this will significantly increase your chances of achieving the objective.
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Types of Financial Goals
Financial goals are divided into three different categories:
Long-term goals could sound something like this:
- “I want to pay off my mortgage.”
- “I plan on paying off my student loans.”
- “I aim to save for retirement.”
These goals exist further out on the horizon and often include mid-term and short-term goals within them. It is always a good practice to break down your long-term goals into smaller, achievable milestones.
Intermediate or mid-term goals are those that take 3 to 10 years to come to fruition. They are not long-winded but take a bit of time to become achievable. Mid-term goals can sound like this:
- “I wish to raise capital or funding for my business.”
- “I want to raise my credit score.”
- “I am working to set up a way of accumulating passive income.”
Mid-term goals often serve as a stepping stone to your longer-term goals.
Short-term goals are more narrowly focused. They exist to support your long-term goals and help you stay motivated for them. What’s more, you can also set short-term goals for things you’d like to afford in the near future. Below are a few examples of what short-term goals can look like this:
- “I want to take a vacation to Italy.”
- “I plan on renovating my kitchen.”
- “I have a goal to save $500 every month.”
Short-term goals are extremely effective at helping you achieve your monetary objectives. This is because they help you visualize the future a lot more clearly than other types of goals. Additionally, they also help you experience what achieving your goals could look and feel like as you hit each milestone or target.
Great Tip: Figure out what matters to you and write it down. After that, design your expenses around these goals 🙂
Examples of Financial Goals
Consider the following examples of financial goals:
- Saving for an emergency fund.
- Paying off debt.
- Saving for retirement.
- Buying a house.
- Starting a business.
- Achieving financial security.
Think about what matters to you as you set your goals. Remember that it is completely okay to have multiple goals that change over time.
How to Achieve Your Money Goals
What are the Advantages of Setting Financial Goals?
Research shows that people who write their goals down every single day are 42% more likely to achieve them. Thus, writing down clear and realistic financial goals will make it easier to achieve them. As a result of doing this, every time you feel like you are acting in a way that is detrimental to your goals, you can go back and revisit them in writing.
This is because jotting your goals down on paper gives them tangible value. This way, they are easier to track. With every progress you make, you get more motivated to go even further. The simple act of revisiting your goals and tracking your budget in writing will help you weigh your decisions. It will let prioritize in a way that will help you progress consistently, over time.
Another – probably the most significant – benefit of setting a financial goal is the decrease in money-related anxiety and stress. In a recent survey, finances were shown to be the biggest stressors for Americans. Imagine the freedom of not worrying about paying off your loans, debts, and mortgage. What would that feel like? Certainly, a lot less stressful and a lot more peaceful and fun.
The goals you want to achieve financially are always going to be unique to you. They will be a direct extension of your needs, wants, and your values. In short, they will be a representation of what’s truly important to you.
Here are six simple steps to help you set realistic financial goals:
- Identify what matters to you. This includes considering everything from immediate to distant goals.
- Divide all your goals into long-term, mid-term, and short-term goals.
- Apply the SMART goal strategy mentioned above to each goal.
- Create a realistic budget for your goals. This will give you a handle on what’s coming in and what’s going out.
- Direct the money set aside for your financial goals into a separate account.
- Monitor and record your progress regularly. See what milestones you are hitting and where you can improve.
When it comes to setting goals, it all starts with the right financial tools by your side. If you are not a financial whiz, you will need resources to help guide you through the process and stay on top of your goals. This article about saving money will serve as the perfect starting point for finance newbies looking to advance their money goals by establishing fundamentally important saving habits.
Financial resources, such as my Financial Planner For Her and the Money Planner For Her can serve as a great foundation. This planner will set a strong foundation for you to build upon as you progress in your financial journey and achieve every success. Before you go, consider the wise words of George Herbert:
“Do not wait: the time will never be “just right”. Start where you stand, and work with whatever tools you may have at your command, and better tools will be found as you go along.”
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And if you’re concerned about improving your finances, I have developed the best money tools based on my expertise and extensive experiences such as educational books on personal finance and trading basics, and a range of digital and audio products. All of these are to help you achieve towards getting you your desired outcome most efficiently and enjoyably, enhancing the learning process.
