The Importance of Setting Financial Goals

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Financial goals are important if you want to build wealth. They are the only way that you can build complete financial stability and independence. Whether you have short-term goals that are modest or long-term goals that are more ambitious if you stay focused you cannot go wrong. 

Short-term goals eventually lead to long-term financial goals because if for instance, your goal is to clear your debt on your credit cards or overdraft, once this is accomplished, you can then start saving to invest in a home or a good retirement plan. 

According to research, setting financial goals helps to increase your motivation and achievements. Therefore, your chances of achieving financial success are magnified if you don’t deviate too far from your set path. 

These are the most important considerations you need to pay attention to as you plan for financial security for you and your family. 

1.      Define your plan

Set your financial goals in a way that outlines what you want to achieve. Think about how you define success and how you plan to get there. A defined plan will also indicate how much you need to save to invest in achieving these goals. 

When you have clear expectations of what you aim to achieve, then it is easier to focus, whether you have a short-term goal for a summer vacation or a long-term plan that will ensure a comfortable retirement. 

Writing your financial goals down makes it easier to stick to the budget you set. 

2.      Create a timeframe

A timeframe is also vital to help you achieve your goals. One example, the faster you pay off credit card debt or a student loan, the less interest you pay. Also, you get closer to an investment goal if you invest a bit more into a mutual fund than planned. Even small amounts add up long-term.

A time frame is one of the greatest ways of ensuring you stay on track. When you check how well you are doing you feel more motivated. 

3.      Include many finish lines

Knowing the period in which you want to accomplish each of your financial goals is important. It feels great to be able to cross the finish line for each goal. 

If you are saving toward putting money down for a home and have planned to have the money over 3 years, then break it down into a yearly amount and then monthly amounts. That way you cross a finish line every month, year, and then at the end of the three years. 

4.      Importance of money management

You don’t need to change your life drastically or cut-down on everything. Start by setting a budget according to your income. 

First, deduct the amount you want to set toward your financial goal and then plan your living expenses from the remaining amount. Look to see where you are spending unnecessary amounts and start cutting from there. You will be amazed at how much you can save by cutting subscriptions to magazines or TV providers that you don’t even read or watch. 

Additionally, any money you pay into your credit cards immediately reduces the interest you pay freeing a bigger chunk of your income for your financial goals. 

Besides saving money and cutting expenses, there are other ways that you can try and achieve your goal. Contemplate finding additional resources or earning extra money. The gig economy provides many opportunities. 

5.      Consider using financial tools

There are some great online financial tools to help you reach your financial goals. Some are available for free from Google Play or the App Store, while others have a subscription or download fee. 

If you need extra motivation, these can provide it because they help you save and invest your money. They help because they have alerts and goal ticklers, and can also help you define your goals and time plan. 

Most Important financial goals

Creating a financial budget that you adhere to is one of the most important financial goals. Thereafter, paying off credit card debt and creating an emergency fund is vital. 

According to the experts, an emergency fund is an amount set aside as a reserve and should cover your expenses for at least 3 months. When in June 2020, unemployment shot up to 20% because of COVID-19, many people were left without an income. According to the Federal Reserve, Americans don’t have more than $400 in savings. 

Thereafter, start saving for your retirement, a down payment for a home, and your children’s education. 

Finally, improve your credit score so that any transactions requiring a loan will ensure that you get a lower interest rate. 

Plan and prioritize and all these are all achievable. 

Jacob Maslow is a native New Yorker with  five children. He left his payroll manager position after finding that his true passion was in writing, and has never looked back.

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