To reach and lead your dream life you must have some plans. Setting up financial goals is the first step of your financial journey. So many people out there are struggling to climb up top and see the light because of their poor financial decisions. If you do not know the target then your life is going nowhere. It is like a floating boat in the middle of the ocean.
Having a goal will help you to walk forward in the right direction. It is easy to set financial goals whenever you want. But, your goals should be realistic and achievable. Because achieving your financial goals is a tougher challenge than setting up. We will give you here some hints on how to set financial goals and achieve them.
Financial goals definition
These types of financial goals are basically based on monetary aspects. Financial goals set a bunch of stages where you will feel financially satisfied. With financial goals, you will be able to know your progress financially. And the satisfaction from achieving it will drive you forward to achieve the next goals. Buying something valuable after months or years yourself and you will know the feels.
SMART goals
It is very important for you and your goals, to know how much you need to save for each goal. Knowing your goals is the first step of your financial freedom. Be sure that you set SMART financial goals.
- Specific
- Measurable
- Attainable/Achievable
- Realistic
- Time-bound
ABC of goals
George T. Doran first brought the ABC of goals in 1981 in a management research paper. Now, besides SMART it is also popular.
- Achievable
- Believable
- Committed
How to set financial goals
First, you know the financial needs that you want to achieve. Then divide those goals into different categories based on their achievable duration and take action. Financial Industry Regulatory Authority (FINRA) categorized financial goals into three categories:
- Short-term goals (less than three years)
- Mid-term goals (three to ten years)
- Long-term goals (more than ten years)
1. Short-term goals
Generally, these are goals to be achieved within three years. Short-term goals are less focused but important for achieving long-term goals. Setting short-term financial goals helps you build confidence by achieving quick wins. Moreover, accomplishing short-term goals can help free up funds to invest toward long-term goals.
Establishing a monthly budget is an important short-term goal. It might be difficult to meet any financial milestones unless you know where all your money is going. After developing a budget that reflects all your monthly spending, it will be easier to see which areas you can cut. When you have a budget, you may want to reassess it regularly. There are a few online apps that make it easy to keep track of your spending. Mint, Personal Capital, and Goodbudget.
To achieve your short-term goals you may accumulate your fund into a savings account that you can access easily. Examples of short-term financial goals are:
- Wedding
- Emergency fund
- Paying off debt
- Saving for vacations
- Home Improvement
- Buying personal stuffs
2. Mid-term goals
Achieving short-term goals regularly, you will feel free to take bigger steps that may take more time and money to accomplish. Usually, these types of financial goals take three to ten years. You need to know the goals you want to accomplish in the period and have plans to achieve them. Have some clear visions on how to accumulate funds and use them.
These types of goals will help you to meet long-term goals in the future. That means mid-term goals are working as a bridge to reach your ultimate goals. So, you need to focus on your goals and work on them. Examples of mid-term financial goals are:
- Funding for real estate
- Working on passive income streams
- Funding for new cars
- Improve your financial position
- Get a life insurance
3. Long-term goals
Long-term financial goals usually take more than ten years. To most people, these are ultimate goals. People are setting long-term goals for their retirement or to be mortgage-free. Sometimes, long-term goals are combined with short-term and mid-term goals. It would be a great idea to break down your long-term goals into short-term and mid-term goals. So, that makes it easier to achieve the large goals.
It is very important to set long-term goals ASAP. Because it takes time to accumulate a larger amount of funds to be free financially. If you set your targets at 40’s or 50’s then this is quite late. Youth or early stage of employment is the best for everyone. Examples of long-term financial goals are:
- Funding for retirement
- Paying off a mortgage
- Saving for childrens
How to achieve financial goals
There are so many ways to achieve financial goals. Reaching your targets is depending on your strategies. Some people reach their goals earlier than others only for their visions and strategy.
Hiring financial advisor
A financial advisor or consultant may help you in setting your financial goals. A consultant may find the best solutions for you by discussing your financial situation. They will set goals for you by dividing them and will suggest your actions.
Revisit your goals
It is very important to revisit your goals regularly after setting them up. Assess the progress and take actions to adjust if necessary. Maybe, you check out your progress quarterly or yearly. Then you will know what is your position and what is going wrong.
Name your goals
Naming your goals and listing them is kind of a game. You will feel fun when you complete them. You need to give your financial goals exciting and specific names, that will thrill you and make you hunger for more goals.
Conclusions
There are a lot of people who set their financial goals, but very few of them get on the board. Because they do not stick to their original plan. So, Sticking with the plans is very important to achieve financial goals. Budgeting and planning is the first door for you, but sticking with plans and achieving goals is the last door of your financial freedom.
