Finances are a major cause of stress in most households, especially learning how to manage your personal finances and plan for the future. One smart solution to your financial problems is to set financial goals. A financial goal is a target or aim which you work towards when planning your money over a set period.
This monetary target drives all your financial behavior from spending to savings to investments. For instance, you can start saving towards buying a home today with a timeline for this goal. Read on to discover more about financial goals and their influential role in proper financial planning.
When not working towards something specific, it’s difficult to achieve any success. You grapple with unpaid bills and piling debt, and expose yourself and your family to financial risks. Financial goals help you prioritize in crucial money decisions and promote accountability. When you work with clear goals, you get a reason to celebrate when you achieve a financial milestone.
Financial goals also give you a framework to build your investments around. If you know what you are investing for, you can set specific criteria for your investments – how much to invest, what assets to invest in, how long you need to invest for, and more. This helps structure your financial planning, so that you know exactly what you need to do to achieve your goals.
To decide your financial goals, do the following:
- Create specific, measurable, achievable, relevant, and timely (SMART) goals
- Evaluate your life and identify what matters to you
- Be realistic when setting goals and budgeting
- Consider both short-term and long-term goals
- Keep tracking your progress
- and know everything coming in and going out
- Actualize your financial goals: get down to work by starting an emergency fund, managing your debt, increasing savings, planning for retirement and implementing other goals
– Short-term financial goals: These financial goals are narrow in scope and have a shorter time span, and can include purchase of home items or home improvements.
– Mid-term goals: Mid-range goals take about 3–5 years to achieve and can include paying off all debt, making a down payment for a house, or paying for a dream vacation.
For you to achieve any financial goal, determine how much money you need. For this, develop a goal chart that describes the financial goal, whether this is a short-, medium- or long-term goal, and estimate the money you need to save toward the goal every month. You can now identify where the money will come from, including cost-cutting, saving, investment or other sources.
Here are some tips to motivate you to work towards your financial goals:
- Use a reward system
- Associate with like-minded people in your life
- Leverage budgeting apps for easier financial management
- Make your financial goals visual on a chart
- Self-educate on personal finances through diverse sources
- Start small and leverage the snowball effect as you celebrate small wins
- Track expenses
- Split big goals into smaller, more manageable goals
Once you build an emergency fund and control your debt, investment becomes the best way to achieve your long-term goals. You can get your money to work for you toward achieving the life you want after retirement, among other goals.
Some investment options include along with high-yield savings accounts, brokerage accounts, and actively managed stock funds to mention a few. These investment options come with varying risks but high potential for good returns to support your goals.
Setting financial goals is an essential step toward becoming financially secure. Short-term, mid-term, and long-term financial goals are essential for good financial health and you can use these goals to create a realistic plan. With these tips, you can now create SMART financial goals and guarantee your financial wellbeing.
To stay on top of your finances, always keep learning and discovering. With SmartWealth by NBK Capital, you will get invaluable financial resources which can guide you through every aspect of your financial life.