5 Smart Financial Goals to Strive ForPublished on December 11, 2020 by Daniel Azzoli
It can be hard to achieve anything without setting clear goals for yourself. Whether you’re looking to get a promotion at work, go on your dream vacation, or move to the big city, you’ll need to put a plan in place if you’re serious about achieving these things.
The importance of setting goals can apply to all sorts of different realms of life, and one of the most impactful ones is your finances. If you want to be in control of your money, you’re going to need to put a plan in place to help you achieve your financial goals. This goes for both long and short term financial goals.
Having said that, it’s not always an easy thing to follow through on. Prioritizing your financial goals and finding a healthy balance can be tricky, particularly if you’re making ends meet. But if you stay diligent, keep things simple, and have the right plan in place, you can still effectively trudge along the road to achieving your financial goals.
In this article, we’re going to break down the importance of goal setting, look at some long and short term financial goals examples, and go over what you can do to reach these goals.
What are Financial Goals?
Before we break down examples of smart financial goals in greater detail, we should start by going over what they are in the first place. Essentially, these are objectives that you set for your money over a certain time period. Regardless of what these goals are, they need to be concrete and clear. They don’t necessarily need to be involved in making a specific purchase. They can include things like:
- Saving for your retirement
- Becoming debt-free
- Launching a business
- Going on a vacation
- Setting money aside for emergencies
- Getting to a place of financial security
Like we said earlier, these can be goals for the long term, or they can be short term financial goals. Keep in mind that there’s an important distinction to be made between a goal and the process to achieve that goal. Financial goals are things you’re looking to achieve when it comes to your financial situation, but you’ll need a financial plan to get there.
Financial Goals Examples
When you start the process of setting goals, consider what you want to achieve with your money and what’s most important to you. And don’t feel like you’re restricted to setting only one or two goals. It’s fine to have multiple goals in mind, and even for these to shift as time goes on.
Let’s dive into some examples of smart financial goals you may want to set for yourself to help strengthen your financial future.
1. Build an Emergency Fund
One of the most important financial goals to set for yourself is to build an emergency fund. Why? Well, it’s a relatively short term goal than can provide you with some security in the long term.
How exactly does it do this? Here are some of the potential benefits you might reap from putting together an emergency fund:
- If you run into an emergency expense down the road, your emergency fund will be your first line of defense. Even if it can’t cover the entire cost of the emergency, it can still help to make a large dent in the overall cost.
- It’s a good test case for your ability to save money. If you can find a way to diligently build an emergency fund, you can build the skills required to save money for all sorts of different financial goals.
- It can provide you with some peace of mind in knowing that if you do face an emergency expense, you’re prepared (at least in part) to handle it.
- It can help you to avoid having to dip into your long term savings or investments if you need money unexpectedly.
After considering all of the potential benefits of an emergency fund, you might want to make it a priority. Take a look at this article to learn more about how to build an emergency savings fund.
2. Pay Off Your Debt
While you might be taking on debt for a perfectly good reason – like taking out a mortgage to purchase a home, or submitting a request for a line of credit if you’re facing an emergency and don’t have the funds to deal with it – at the end of the day, you’ll need to pay it off. And ultimately, most debt – whether taken on for a good reason or not – can be a strain on your finances. So, because of this, you may want to add “paying off debt” to your list of smart financial goals to strive for.
While it might be a long road, with discipline and patience, you may be able to pay off your debt effectively over time. In order to do this, there may be some simple strategies you can follow. This can include things like:
- Using your budget effectively
- Paying off your debt that carries the highest interest rates first
- Using cash windfalls for debt repayment
- Pausing your use of credit cards
If you want to learn about these measures in more detail and learn about some other ways to help pay off debt, take a look here.
3. Diversify Your Streams of Income
Having multiple streams of income can help you out in all sorts of ways. For example, if you’re looking to retire early, introducing a few extra streams of income into your financial portfolio may help you get to whatever amount of money you need to have saved for retirement sooner than you would otherwise. Even if you can’t fully retire, you might be able to ease up on your workload earlier in life.
It can also be a way to help accelerate your debt repayment. Overall, diversifying your income streams is a great way to make sure you’re not fully reliant on the money you make from your primary job, even if it happens to be a job you love. If you need some help getting started, take a look at this article on passive income ideas.
4. Spend Less Than You Make
This is a basic principle of maintaining a healthy financial standing, and because of that, it’s one of the most important financial goals to strive for. If you can manage to spend less money than you make, it’ll go a long way in helping you to reach your other financial goals – whether that involves paying off debt, saving up for retirement, or buying a home.
Like we mentioned in the last section, diversifying your income streams can be a useful way to boost the amount of money you have coming in. But you may also want to revisit your budget to see if there are any areas where you can cut back. When you do manage to get to the point where you’re making more money than you’re spending, make sure you put that money to good use.
5. Make a Plan for Your Retirement
While you may actually like the work you do, there may come a time when you’re ready to hang it up and call it a career. When this day comes, you’re going to need to be financially prepared. That means planning for retirement well ahead of time.
Making a plan is essential for a few different reasons. For one, this process may be a longer one that you had initially anticipated. So if you’ve put together a plan to retire by the age of 55 but end up running into a few roadblocks along the way, all that planning and saving you’ve done can still help you retire by a relatively young age.
On the topic of roadblocks, you never know what curveballs life may throw at you. If you end up with health issues of some sort or need to stop working, having planned ahead can help prepare you for that potential outcome.
If you plan to retire early, you may end up formatting your budget to do a lot of your saving early on in life. This could be beneficial to you down the road and you may be able to ease up on your workload. Overall, having the option to retire early but still wanting to work is a better situation than wanting to retire but not being in a financial position to do so.
Set Smart Financial Goals and See Them Through
If you’re hoping to luck into a healthy financial standing, don’t hold your breath. Getting to that point takes a lot of work, patience, and dedication. The starting point for this process is setting financial goals. You’ll need to have these goals in mind, draw up a roadmap of how to achieve them, and then put in the work. While it might sound daunting, if you can manage to incorporate healthy financial habits into your everyday life, it may not be as difficult as you’d think.
Take some time to sit down and really think about what you want in life. Once you’ve established what these things are, you can start to make a plan. The road to achieving your financial goals isn’t always a straight line, but dedication and patience can get you there. We hope this article can be a good starting point!