What are Financial Goals?
Financial goals are your personal objectives for savings, investment and / or spending habits that will help you achieve your dreams and ideal future. They should be aligned with your long-term plans and are typically influenced by the stage of life you are currently in.
Why Set Financial Goals?
There are many benefits to setting financial goals. Firstly, they help shape your future and financial success by influencing your actions today. If you don’t have anything in mind to work towards, you will likely spend more than you should in the near-term and fall short of your financial dreams. Financial goals also help motivate you and remind you of the reasons you are saving and budgeting. Another important benefit of setting financial goals is that they help reduce stress and anxiety surrounding spending and financial decisions as you have already taken them into account.
How to Define Your Financial Goals:
As with many other goals, you should try to identify short-term, mid-term, and long-term objectives to work towards. Short-term goals take under one year to complete and include things like saving for vacation or a new pair of shoes. Mid-term goals take a few years and include targets like saving for a car. Long-term goals usually take longer than 5 years to achieve and include things like saving for a house or a retirement fund. Follow these steps to create goals under each time frame:
- Figure out what matters to you. What do you want to achieve? Spend some time journaling about what you really want and why.
- Determine what’s in reach and what will take time in order to separate your goals into short-term, mid-term and long-term.
- Apply a SMART framework to identify Specific, Measurable, Achievable, Relevant, and Timely goals.
- Create a realistic budget to achieve each goal and stick to it.
- Direct leftover cash from your budget into a separate account designed to address your top priority goals.
- Monitor your progress to make sure you’re hitting important benchmarks.
Examples of Financial Goals:
When defining your goals, it’s important to consider what is important to you and your personal objectives. Your goals may change over time and evolve as these objectives change too. Some examples of financial goals include:
- Establishing a budget
- Saving for retirement
- Creating an emergency fund
- Paying off your credit card debt
- Buying a home
- Starting a business
- Saving for vacation
- Getting life insurance
- Saving for college
- Paying off student loans
- Improving your credit score
How to Stick to Your Financial Goals:
Try using financial psychology to achieve your goals by visualizing your ideal life, giving your goals names that spark excitement and motivation, time-stamping your goals and creating visual representations to help picture your goals.
Discover what is driving you to achieve your goals in the first place.
To learn more about creating a budget and sticking to it, visit our guide here.
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