Meeting Goals, especially financial goals are never easy to achieve. Having a financial goal is one of the most prominent ways of financial sustainability. Well you’ll never achieve financial goals without knowing how to achieve. Let’s take a short read.
Financial goals are targets set by an individual to achieve financial milestones or plans. In other words, they are financial objectives that an individual wishes to accomplish within a certain time frame. For example, it could be setting up a fund for their children’s education, travel, emergency, health care, etc.
Setting financial goals can help individuals maintain strict discipline while spending. It also encourages savings to attain those goals within that period. In addition, it helps individuals make conscious and informed decisions, especially on investments.
Setting financial goals is a key component to attain financial freedom. Each individual’s personal financial goals are different from another. This is because each individual has unique values and aspirations in life. Financial goals planning is the first and most important step toward a safe financial picture in the future.
Types of financial goals
There are two main types of financial goals:
- · Short-term goals
- · Long-term goals
A short-term goal has to do with “in the near future”. The near future can mean today, this week, this month, or even this year. A short-term goal is something you want to accomplish soon – a goal you can achieve in 12 months or less.
These are smaller financial targets that can be reached within a year. This includes things like a new television, computer, or family vacation.
A long-term goal is what you want to do further in the future. Long-term goals require time and planning. They are not something you can do in a week or even this year.
This type of goal usually takes much more than 5 years to achieve. Some examples of long-term goals are saving for a college education, retirement, or a new home.
Proper planning and management of short-term goals are important to achieving long-term goals. Long-term financial goals require diligent planning, execution, and patience.
How To Set Financial Goals?
1. Discover Your Motivation
Consider not only what you want to achieve but also why you want to do it. Your goals can be placed into perspective, and motivation can be increased by giving them a cause. For example:
· Build up an emergency fund so you can afford to pay rent if you lose your job.
· Start a savings plan for that thing you want to buy so badly
2. Assess Your Current Situation
When you know how much money you have, you will not just be able to plan your goals better but also work out the correct method to find the extra money. You can have several objectives in mind after giving them some thought and be unsure about what to do next. Or perhaps you lack any clear objectives. It’s alright. Regardless of whether you have short-term, long-term, or undefined goals, taking stock of where you are today can help you go on the right track. Assessing your income, spending, and net worth should be your first step. According to Steve Martin, a financial planning expert at Oasis Wealth Planning Advisors in Nashville, Tennessee, knowing these four things will help you set goals and prioritize them.
3. Use The SMART Goals Method.
Think about all the components of a plan, not just the goal but also the actions you’ll take to get there. SMART stands for
- · Specific
- · Measurable
- · Achievable
- · Realistic
- · Time-bound
You may keep track of your development by setting quantifiable goals. It provides you with a clear picture of how your activities are correlating with your aims and identifies any necessary improvements. By putting into use this principle, you will be able to create financial goals for yourself which are ‘SMART’ and will, therefore, be easy to achieve.
For example, say you want to save for a vacation at the end of the year. Lay out the details before you move forward: Pick a destination, decide when you want to go, and estimate the cost. Determine whether this goal is doable and practical given your income, savings, and expenses. If the goal seems out of reach, try to make adjustments before scrapping the idea entirely.
4. Create A Realistic Budget.
Creating a budget to track your spending and savings is a crucial first step in figuring out your financial objectives. A budget can help you develop financial discipline by assisting you in managing your expenditures and expenses, as well as by assisting you in building the corpus required to meet your goals. A little thought and cautious planning are all that is required to create a budget.
List your complete income and then deduct all of your usual expenses, including any outstanding bills, from this amount. Make a list of the necessary expenditures, make allowances for savings, and then determine your maximum spending limit. However, sticking to your budget is crucial since it will make it easier for you to create and achieve your financial objectives.
5. Put Them On Paper.
Make a note of your goals when you’ve thought them through. This may keep goals organized, measurable, and unambiguous. Use a notepad or a spreadsheet to complete the form. Track your progress and check in sometimes. Go on to the next one when you’ve completed the first.
Last but not least, having a financial consultant never goes wrong. They are there to help you set spending preferences, work on your investment and savings, monitor income versus spending and most importantly, help you with strategies on realizing your financial goals.