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What are financial goals, and why are they crucial to your future?
Having financial goals is a crucial step toward a financially successful future. They help direct your saving and spending habits in a positive direction. For example, you could have goals to eliminate debt, save for an emergency fund, invest for retirement, or even launch a business.
These goals will influence your daily financial decisions.
And with them, you’re more likely to spend your money wisely.
Now, let’s look at some examples.
Examples of Financial Goals
When setting your goals, it’s essential to categorize them into short-term, mid-term, and long-term goals.
Here are some financial goals examples for each category:
- Short-term financial goals (within one year) include creating a budget, building an emergency fund, paying off debts, or ensuring you have adequate insurance coverage.
- Mid-term financial goals (up to five years) include building multiple income streams, saving for a new house, or paying off debts.
- Long-term financial goals (> five years) could be growing your investment portfolio, planning for retirement, saving for your kid’s education, or paying off your mortgage and student loans.
Now, let’s look at the potential pitfalls that could derail your progress if not handled wisely.
Common Pitfalls to Avoid When Setting Financial Goals
Here are some mistakes to watch out for:
- Setting unrealistic goals: Unrealistic goals lead to failure, frustration, and demotivation.
- Not ranking your goals: Not prioritizing your goals can lead to major headaches down the road.
- Not creating a budget: Without a budget, you’re more likely to spend wastefully or overspend and not save and invest.
- Ignoring the need to tweak goals: Life happens, and financial situations can change.
- Not setting a deadline: Without a deadline, you’ll have no urgency to achieve it and will likely kick the can further down the road.
- Not accounting for potential setbacks: An emergency fund and insurance policies are your safety net. Without it, a financial setback can derail your progress toward your goals.
Now that you know what to avoid, let’s jump right in on how to set and smash your financial goals.
Here’s How To Set & Reach Your Financial Goals
Step 1: Assess Your Current Financial Situation
First and foremost, you need to know where you stand financially.
How much do you earn? What are your expenses? Any debts to be paid? What do you want to achieve?
You have to clearly understand your current financial status and what you’re aiming for.
Step 2: Use the SMART Goal-setting Method to Set Your Goals
Next, define and write down all your goals using the SMART goal-setting method.
Here’s how:
| Specific (S) | Instead of “I want to save money,” try “I want to save $6,000 for a vacation to Hawaii in two years.” The more precise your goal, the easier it’ll be to achieve. |
| Measurable (M) | To save $6,000 in 2 years (24 months) is $250/month. It has to be measurable so you can track your progress. |
| Achievable (A) | Based on your income and expenses, is it possible to save $250 per month? |
| Relevant (R) | Your goals should align with your broader financial and life objectives and be in the direction you want to take. |
| Time-bound (T) | Deadlines create a sense of urgency and motivate you. Setting a timeframe helps you break down your goal into manageable chunks. In this example, it’s $250 per month over two years. |
Also, always keep your goals in sight at all times.
Seeing your goals regularly can keep you motivated and on track.
Step 3: Create a Budget
The first step in progress toward your financial goals is having a budget.
A budget will help you keep track of your income and spending, so you’ll never have to wonder where your money goes.
I like the 50 30 20 rule, which splits your post-tax income into three parts:
- 50% for Needs
- 30% for Wants
- 20% for Savings
There are many different types of personal budgets.
Pick one that you like and get going.
Overcoming Roadblocks in Your Journey
The truth is, achieving your financial goals isn’t going to be a walk in the park.
You’re bound to hit obstacles. But every problem has a solution. The most common obstacles in achieving your financial goals include procrastination, loss of motivation, and unexpected financial setbacks.
Here are a few tips to overcome these:
- Fuel Your Journey with Your ‘Why’
People often say that motivation doesn’t last. Well, neither does bathing. That’s why we recommend it daily.- Zig Ziglar
Remind yourself of your ‘Why’ every day.
- Embrace Setbacks as Opportunities for Growth
For example, Thomas Edison failed a thousand times before he successfully invented the light bulb.
I didn’t fail 1,000 times. The light bulb was an invention with 1,000 steps.- Thomas Edison
Like Thomas Edison, view your setbacks as stepping stones to your financial success.
- Keep the Momentum
If you can’t fly then run, if you can’t run then walk, if you can’t walk then crawl, but whatever you do you have to keep moving forward.- Martin Luther King Jr
Every journey has its ups and downs. Still, with the right attitude and perseverance, you can overcome any obstacle in your path. After all, as Robert Schuller once said, “Tough times never last, but tough people do.”
So, keep your head high and keep pushing forward.
Transforming Your Dreams into Reality
Turning your dreams into reality is going to take a lot of work.
But every remarkable journey begins with a single step. By setting and committing to achieving your financial goals, you’ve taken that first vital step. Your dreams of owning a home, launching a business, or retiring comfortably will become a reality.
Let’s get going!
