No matter what stage of life you currently find yourself in, we’re pretty sure that you’ve given some thought about both your short- and long-term personal financial goals.
Whether you’re single or married, just beginning your career or already looking forward to retirement, the key to achieving your personal financial goals is setting realistic goals, following through on them, and continuously tracking your progress.
Why set financial goals?
Setting financial goals is an important early step to take towards long-term financial security. Whether you’re a student or young professional seeking to pay off your student debts, or a married couple looking to plan for your children’s education, financial planning can ease a lot of the pressure on your budget and lifestyle.
Without any well-planned financial objectives, you run the risk of spending beyond your means. If you overdo your discretionary spending or wind up stuck under a pile of credit card debt, then it may be extremely difficult (or even impossible) for you to cover emergency expenses, pay for insurance, or even retire comfortably.
That might paint a bleak picture, but the good news is that with some financial discipline, it can actually be relatively easy to set (and stick to) your personal financial goals!
Time horizons for financial goals
As you collect and select your goals, you might find that some are broad and far-reaching, while others have a narrower scope.
The best way to reach your financial goals is by making a plan that prioritizes your goals, and an easy way to do this is by separating them into three time categories:
Short-term goals
These can be achieved in one year or less.
- Take a vacation
- Establish an emergency fund
- Pay off your credit card debt
Mid-term goals
These can be achieved in 2-5 years.
- Buying a car
- Start a business
- Pay off your student debts
Long-term goals
These stretch beyond 5 years, and need more commitment.
- Purchasing a home
- Saving for a child’s education
- A comfortable retirement
Steps to setting personal financial goals
The process of personal financial planning mainly revolve around determining which goals you actually want to achieve, working out how much time and money you need to reach them, calibrating your budgets to ensure your goals are doable, and being open to rethink these plans, as needed.
Here are a few steps for planning out personal financial goals – take as much time as you need for each step, to make sure that your plan is as solid as possible:
1. List out all of your financial goals
From paying off credit cards to going on a dream vacation, buying your own home to having enough for retirement, write down EVERYTHING! The more complete and comprehensive your list, the better you would be able to proceed with planning and prioritizing each item.
Try to rearrange them according to the ones you would consider pressing or more distant. Which goals seem logical or a long-shot? Determine which goals take a higher priority and which ones are more long term objectives.
2. Refine your goals to make them SMART
You may have already heard of the tried-and-tested strategy of making goals SMART: Specific, Measurable, Achievable, Relevant, and Time-bound, so get started!
An example would be “I would like to pay off my student loans by the age of 30, by contributing $200 toward my debts each month.”
3. Create a realistic budget
Given your current sources and levels of income, the purpose of maintaining a budget is to keep on top of what’s coming in and out of your bank accounts. Identify your monthly fixed and variable expenses, which costs eat up larger chunks of your income, and examine which corners you could afford to cut.
4. Save extra cash toward your goals
Now that you have a working budget, you should be able to see how many leftover dollars you have at the end of each period. Treat this amount as direct investments into your immediate goals; it might even be a good idea to open a separate savings account to ensure that you don’t unwittingly dip into these funds when you don’t really need to.
5. Keep track of your progress and re-plan, if needed!
Spend a few minutes each week or month to go through your budgets to make sure that everything is in order. It can also be fun to work out how close you are to achieving your next goals, big or small.
Your financial situations and needs change over time, so don’t hesitate recalibrating your budgets or goals whenever you get a raise, move to a larger home, or simply decide that maybe you don’t really need to buy the newest smartphone.
Now, let’s get to it!
Financial independence is not a matter of luck, but of proper planning and execution. Each person has unique financial goals and situations, and the plans you make can be as flexible as you need them to be. You may take a few stumbles along the way, but little changes of habit and a little more mindfulness toward your spending (and saving) habits can make the journey a lot easier for you.
Money affects all aspects of your life, but it’s important to remember that it’s not the only thing in your life. You may not be able to have or achieve everything at once, but focus and discipline can help ensure that you stay on-track to reach your goals. Plus, resources like Academy will always be around whenever you need a little extra guidance (or push!) along the way.
