Your financial goals are the targets you aim to achieve over a set period with your money. Your plans for your finances can be short-term, medium-term, or long-term.
Even though it’s natural to feel lost or overwhelmed when considering your financial goals, remember that they are still achievable — as long as you were realistic when setting them. The most crucial first step is to realize and honestly believe that these goals are achievable with some planning, discipline, and faith in yourself.
Here are some tips for setting achievable financial goals — and remember: yes, you can!
Step 1: Visualize Your Financial Goals
Imagine where you would like to be and why you would like to be there. You will be motivated and put things in perspective by attaching a purpose to your goal.
For example, if you lost your job, you could pay rent if you save up six months’ worth of emergency funds. Alternatively, save money to buy your dream home and make new memories there.
Step 2: Categorize Your Financial Goals
Identify short-term, mid-term, and long-term financial goals. Short-term goals are often more manageable and can be attained quickly. Preparing for medium-term and long-term financial goals may take more time and savings. Generally:
- A short-term financial goal is between six months and five years in the future.
- Mid-term financial goals range from five to ten years.
- A long-term financial plan is more than ten years away.
Step 3: Be SMART
Your financial goals should be SMART: Specific, Measurable, Attainable, Realistic, and Time-Based.
Specific Financial Goals
Be specific about your goals when you make them – and about what you want to achieve. For example, if you want to save up for retirement, how much do you want to have, and when do you need it? How much do you need to put away every month to meet that baseline?
Measurable Financial Goals
Measurable goals are easy to track since they are specific. You can prove your progress by meeting checkpoints along the way when your goals are measurable. The measures you use all depend on the types of plans you have made. Setting small and quantifiable milestones (like X money saved per month or by the end of each year) makes it easier to stay on track.
Achievable Financial Goals
Establish what steps you will need to take to achieve your financial goals. Setting up automatic contributions is one of the best ways to achieve retirement investing goals, for example. Moving that money to your retirement account automatically will prevent you from spending the money elsewhere.
Realistic Financial Goals
Make sure your financial goals are realistic. It is beneficial to set challenging financial goals, but they should be attainable. For example, it would be very difficult, though perhaps possible, for the average earner to save $125,000 for a luxury wedding over two years.
Time-Based Financial Goals
There is no such thing as a goal without a deadline. It’s time to determine the “when” of your financial plan once you’ve established the who, what, where, why, and how. Setting a deadline will help you hold yourself accountable and reduce procrastination.
Step 4: Get to Work!
Once you have defined your goals and timelines, it’s time to get to work. Here are some ways to make your financial goals a reality.
Start a Budget
Budgets are necessary if you want to save money. By preventing overspending and undersaving, you can keep all your other goals on track.
Build an Emergency Fund
The importance of keeping a healthy emergency fund in case of financial challenges such as job loss or unexpected medical expenses cannot be overstated.
Saving for Retirement
Don’t put off saving for retirement for decades, since you’ll have to rely on your savings in retirement. For most people, a realistic goal is to have enough money to pay themselves at least 75% of their current salary in interest.
Tackle Your Debt
Toxic debts such as credit card debt and payday loans should be paid first. Then, pay debt with lower interest rates, such as student loans or mortgages.
Remember that with the right mindset, these goals are within your reach. Always believe that you can achieve your financial goals!