How to set and achieve financial goals
Everyone has a financial goal at every life stage. Our financial objectives change over time, so should our financial plans. Only wishful thinking cannot help you in achieving financial freedom. You’ll have to make a strong financial plan for your personal finances and work hard to succeed.
Let us break down the personal financial goals for you. We’ll show you how you can take control of your financial life and set the foundation for your success.
What are Financial Goals?
Financial goals are set milestones or objectives that you want to accomplish over a specific period. This specific period can span from a daily financial objective to a long-term milestone over several years.
Financial goals are your plans for managing your money. For instance, you can plan a monthly budget to manage your paycheck. You can plan to buy a home 10 years from now, as a long-term goal.
How to Set Clear Financial Goals
Creating achievable and realistic financial goals is the first step towards accomplishing financial freedom. Setting unrealistic or vague objectives would never let you achieve success.
Here are a few quick tips for you to set clear financial goals.
- Decide what is financially important to you right now. Write down the objectives for immediate financial planning.
- Look at the broader picture, plan for midterm and long-term financial objectives too.
- Make your financial goals SMART:
- Relevant, and
- Create personal finance budgets to manage your income with a buffer for savings.
- Monitor and track your performance by matching your targets in the budget against actual results.
Setting financial goals depending on your unique financial circumstances is key here. Do not try to copy others here as it might not work well for you.
Financial Goals by Timeframe
An effective way of achieving financial goals is to set them by timeframe. Categorize your financial goals into short-term, midterm, and long-term objectives. It is the most realistic way of achieving financial success.
Short-term Financial Goals
Achieving short-term goals can be easier for anyone with little planning and effort. It can set a strong foundation for your long-term financial success as well. You’ll set the basics right here and learn to use the financial tools.
Examples of short-term financial goals can be:
- Paying off credit card bills
- Reducing overspending
- Saving for a vacation tour
- Savings for a wedding
- House improvements and renovation
- Creating an emergency fund
How to Set and Achieve Short-term Financial Goals?
You can set any financial goals that within the next 12 to 24 months. You’ll need to set the tone right away to achieve these goals.
Here are a few quick tips to achieve short-term financial goals:
- Create budgets for your monthly income and spending.
- Start tracking your daily and monthly expenses.
- Monitor your spending habits against limits set in the budgets.
- Create a cushion of savings for an emergency fund.
- Choose a strategy to pay off short-term debts such as credit card bills in full.
- Set a savings target by the end of your specified period.
Midterm Financial Goals
If you do well, you’ll be successful with your short-term goals. It will encourage you to take on your next financial challenges. Your midterm financial objectives will link the short-term success with your long-term goals.
Even if you didn’t succeed fully with your budgets, emergency fund, or paying off credit card bills in full, it should encourage you to move on. You have taken a step in the right direction. It’s time to take on the next challenge.
Your midterm financial goals can be listed as:
- Paying off your student loan
- Saving money for your new house purchase down payment
- Spending time on your dream vacation with your family
- Major house renovation
- Disability and life insurance
- Additional retirement plans
- Buying a car with cash payment
- Sufficient savings for investment
How to Achieve midterm Financial Goals?
You can set the midterm financial goals that you can realistically achieve within 5 years. Here are a few ways you can achieve midterm financial success.
- Contribute towards additional insurance plans such as life and disability insurance plans for your family.
- Find ways of diversifying your monthly income with side hustles.
- Put your savings in high-yield savings or certificate of deposit accounts to earn profits.
- Think of refinancing your high-interest loans with a single low-interest loan.
Long-term Financial Goals
Long-term financial goals are the ultimate prize that everyone eyes. Saving sufficient money for retirement life is one of the key long-term goals for anyone. However, these goals also depend on the life stage you are going through right now.
Examples of long-term financial goals include:
- Buying a house
- Saving money for retirement
- Paying off all major debts including mortgage
- Financing your children’s education
How to Achieve long-term Financial Goals
Your long-term financial goals include any financial plans that you want to accomplish 20 years from now. Practically, you can list any financial objective as a long-term goal that spans above 5 years.
Here are a few tips for you to achieve your long-term financial goals:
- Carefully plan for your retirement living needs.
- Estimate your retirement time income including retirement plans, social security, maturing investments, and so on.
- Start contributing towards additional retirement plans such as a Roth IRA.
- Invest your money in the long-term capital appreciation assets.
- Find ways to earn extra through investments and side hustles.