You work towards goals all the time. Maybe you’re focused on a personal goal, like losing weight or getting more sleep, or a professional goal, like getting a promotion at your current company. In addition to focusing on those ambitions, it’s essential to set your sights on financial goals.
What are financial goals?
Financial goals are yardsticks that apply to whatever area of your money management skills you want to improve.
While setting financial goals is a crucial part of an individual’s well-being, most Americans struggle to identify something to work on with their money. In 2020, only 38 percent of adults in the US had specific financial goals, according to research from the Lincoln Financial Group.
Why financial goals are so important
could you to think about what you want to accomplish with your money, but making that optimistic picture of personal finance a reality requires following a specific and achievable plan. Goal setting can break a much larger goal into smaller steps, allowing you to feel a greater sense of accomplishment as you get closer to reaching it. That positive reinforcement can put some wind in your sails and keep you pushing forward, particularly for the more difficult steps ahead.
Think about running a marathon. Instead of trying to walk out the door and run 26.2 miles tomorrow, you could set a goal of running 15 minutes today. As he continues to work toward race day, the goals become more and more challenging, but his steady progress has helped the rest of the training feel more within his grasp.
The same principle can be applied to setting financial goals. When it comes to money, what gets measured gets done. If you set a goal to save 10 percent of your monthly income, you can regularly review your account balance to make sure that’s really happening. Setting those goals is one way to hold yourself accountable on the journey to financial security.
Monitor and make adjustments to your financial goals
Setting a financial goal is not a “set it and forget it” act. To reach any goal, you need to regularly calculate how far you are from getting there. It is important to monitor your progress and make adjustments when necessary.
How often you track your status depends on the type of goal. For example, if you’ve decided to set a goal to stick to a budget, you’ll need to monitor your progress throughout the month, not just when you’re doing your count on the last day of the month. By then, it’s too late to recognize if you’re overspending.
For long-term goals, like saving for retirement, those assessments may have wider windows between them. Maybe you can use your quarterly 401k statements as check-in dates, or you can schedule a couple of appointments with your financial planner to discuss whether it’s time to change your strategy.
As you think about your financial goals, it’s important to remember that life happens. You may find yourself with an unexpected job loss, a slew of medical bills, or some other major event that derails the initial path you planned. This may mean adjusting those goals or hitting the pause button for a while until you can get back to normal. It can also lead to a completely different set of goals and priorities.
Examples of Important Financial Goals
Some financial goals require your immediate attention, while others seem like distant dots on the horizon. Those variable deadlines will affect your priorities and your strategies to achieve them.
Short term financial goals
Short-term financial goals are those goals that demand your immediate attention. For example, if you’ve racked up credit card debt, paying it off to avoid additional charges should be at the top of your to-do list. While you’re getting your monthly balance down to zero, you’ll also want to set a budget to track your spending and avoid the same pitfall in the future.
There are also fun short-term financial goals. If you want to take a spring break vacation next year, make a plan to save for those expenses. With monthly deposits set aside, you can enjoy a getaway without the worry of going back into debt.
Medium-term financial goals
With medium-term financial goals, you have some extra time on your side. Maybe your goal is to buy a home and you want to save a hefty 20 percent down payment to avoid paying mortgage insurance. Maybe you want to save enough money to buy your next car with cash. These goals may not seem just around the corner, but the right savings strategy will bring them a little closer.
Long-term financial goals
The classic long-term financial goal is retirement. In your twenties, still early in your career, leaving the workforce can feel like a world away. That’s the best time to set a goal, though: when you have more time to go and can maximize an employer-sponsored retirement plan and IRA. If you wait to set your retirement goals until age 45, it can feel like you’re looking up at an impossibly high mountain and overwhelmed about where to start climbing.
13 popular financial goals
If you’re not sure where to begin in setting your financial goals, consider some of the key milestones that appear on many people’s lists.
- Create an emergency fund
- Set a budget
- Get out of credit card debt
- Improve a credit score
- pay off a car loan
- save for a vacation
- buy a house
- Pay off student loan debt
- Save for a child’s college education
- pay off a mortgage
- Buy a vacation home
- Save for a comfortable retirement
- Leaving an inheritance to heirs or a charity
Whatever financial goals apply to you, be sure to add establishing your financial education (and continuing to strengthen yourself) to the list. One of the key pieces to your success is being a lifelong learner, dedicated to learning more about saving and investing. With that commitment to education, you’ll be able to set the right goals at the right time.