Setting Your Financial Goals
Decide what you want to accomplish with your money and when you want to accomplish it.
Your financial goals are unique to you, so whatever your financial situation, it’s important to consider where you are now and where you want to be in your future. Setting financial goals is an important first step toward becoming financially secure.
Without specific goals, it’s harder to be persistent and strive toward a better financial situation. When you have a specific financial goal, you’re more likely to take the necessary steps to achieve it.
How to Set Financial Goals
Here are three simple steps to help you set your financials goals.
1. Look at the Big Picture
Figure out what matters to you. You’ll need a big-picture view of what you want your financial life to look like so that you can define success. You can start by asking yourself where you want to be financially in the next five, 10, and 20 years.
2. Be Realistic
Setting unrealistic goals can result in demotivation. If your goals seem like they’ll be impossible to achieve, you may end up feeling like achieving your financial dreams is hopeless, thereby leading you to give up.
In order to set realistic goals, it helps to sort out what goals are within reach and which ones will take some time.
3. Set Specific Goals
Setting specific goals will help you figure out what steps you need to take to achieve them. An example of an unspecific goal is “save for a down payment on a home”. This goal doesn’t specify what the amount of the down payment will be, how much you should save, or what the time horizon is.
Instead, you should decide exactly what you need to do to accomplish this goal. For example, you could decide that your long-term goal is to save $100,000 for a down payment in five years. This can be even more specific: Saving $100,000 in five years would mean saving $20,000 per year, $1,666 per month, or $385 per week.
Difference Between Short- and Long-Term Goals
Short-term financial goals have a limited time horizon; these are goals you will want to achieve in less than a year. Examples of short-term goals can include purchasing household furniture, minor home improvements, or saving for a vacation.
Long-term financial goals have longer time horizons; these are goals you will want to achieve over multiple years or even decades. The ultimate long-term financial goal is funding a comfortable retirement. Examples of other long-term goals can include paying off a mortgage or saving for a child’s education.
Both types of goals are important, however, you should identify and prioritize your goals, establish time horizons for each goal, and assess your finances honestly when making decisions that relate to short- and long-term objectives.
After You Set Your Financial Goals
You’ll want to use the right money strategy to help you reach your goals. Learn the differences between saving and investing to help you determine which path is best for you.
If you decide investing is the right move, you may want to work with a registered investment advisor to help you come up with a plan and investment strategy. Before choosing an investment advisor, do a background check to ensure they are registered.
Once you’re set up and running with your financial goals and money strategy, be sure to check in on the status of your goals periodically and track your progress. Conducting an annual financial review will also give you an opportunity to formally review your goals, update them, and review your progress to date.