How to Set and Achieve Financial Goals

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A financial goal is a specific objective you set for yourself to achieve in a period of time, like the destination at the end of map directions. Setting financial goals helps you improve your financial situation, whether you want to pay off debt, buy a home or fund retirement. 

In this guide, we’ll look at different types of goals, how to set financial goals and offer some expert tips to help you reach your goals on time.

Types of financial goals

Before setting any goals, you should consider when you need to complete the goal. Typically, the more money you want to put toward a goal, the longer it will take to achieve. 

Financial goals can be broken into three types:

Short-term: Short-term financial goals tend to be smaller and typically are completed within a year. Saving three months of living expenses in an emergency fund, upgrading to a new computer or planning a vacation are common short-term goals.

Medium-term: These goals will take longer to reach than short-term goals but are still generally achievable in the next one to five years, such as paying off credit card debt or saving for a new car.

Long-term: Long-term goals are goals you plan to work toward for many years and may not reach until well in the future. Saving for retirement or paying off your mortgage, for example, are some of the most common long-term financial goals.

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5 steps to create financial goals

Let’s take a look at the five steps you’ll need to follow for creating financial goals.

1. Decide on your priorities.

The first step to setting your goals is to make a list of the ones that mean the most. This means you’ll need to list your potential goals and decide which goals take priority. As you list your goals, think about which ones will be easiest to achieve as well as what goals will have the biggest impact on your financial health.

Don’t try to overload yourself with lots of goals right away. Instead, start by choosing the one or two goals that are most important to you to focus on first. Then you can easily add more if your situation changes, such as getting a raise or adjusting your budget.

2. Rebalance your budget.

Your monthly budget will likely need a rebalance to fit your new financial goals. Your budget works as the roadmap for your goals. To set your new budget, add up your monthly income and monthly expenses. Subtract your expenses from your income, which gives you the extra money you have each month to put toward your goals. Allocate these excess funds toward your goals.

Your budget plays a big role in how long your goals will take to achieve. More room in your budget means you can save up for a goal faster, while adding more expenses could delay reaching your goal. For example, say you have $500 per month to put toward your goal of paying off $2,000 in credit card debt. It’ll take you at least four months to reach your goal, and likely more when you factor in interest.

3. Choose an account type.

Most financial goals relate to paying off debt or saving money for something, like a house or even retirement. Your savings goals can be affected by the type of account in which you choose to put your money.

The right account might give you access to tax benefits or high interest rates. Or you might want an account that makes it easy to withdraw funds when needed. Think about how you plan to use your money to help you determine the right accounts for your goals. Common account types include:

401(k)s are an employer-sponsored retirement plan.

Individual retirement accounts (IRAs) also help you save for long-term retirement goals.

Savings accounts, especially high-yield accounts, are often used for short-term goals like emergency savings or large purchases.

Certificates of Deposit (CDs) have a set interest-earning period that’s great for medium-term savings goals.

Brokerage accounts let you build wealth through investment vessels like stocks or mutual funds and are ideal for long-term goals like early retirement or building a child’s college fund.

4. Automate your goals.

One of the best things you can do for your financial goals is to automate them. Automating your goals takes away your chance of human error, such as forgetting to deposit money into a savings account.

You can automate most goals by setting up automatic deposits or payments, depending on the type of goal you have. Let’s say you’re trying to pay off student loan debt. Your loan company will likely have an option to set up automatic payments, and you can typically choose the amount. Likewise, if you’re saving for a purchase goal, such as a down payment on a house, you can set an automatic funds transfer into your savings account each month.

5. Check in regularly.

The key to successfully setting financial goals is to re-evaluate as needed. While you should strive to stick to your end goal, the journey to reach it might change. You may have to make adjustments to your budget or timeline based on your current situation. Additionally, you may find you’re on track to reach your goals and want to add new ones.

Regular check-ins can vary based on your goal timeline. A good rule of thumb is to check your goal progress at least once a month for short-term or medium-term goals. Long-term goals may not need check-ups as regularly, but you should still review them once a year.

3 tips to help achieve your financial goals

Having trouble reaching your goals? Try these three tips to help you stay on track:

Start by working on stability. If you’re just starting out on building your financial health, you might be hurting your chances of success by going too big, too soon. Rather than aiming for a lofty financial goal, start by paying off high-interest debt and building an emergency fund to start.

Be realistic about your budget. Your budget only works if you stick with it. Avoid creating a budget that’s so tight you go over it each month.

Reward yourself. Small rewards are a great motivator for goal-setting. Consider getting yourself a reasonable reward when you meet your goals on time.

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The post How to Set and Achieve Financial Goals appeared first on SUCCESS.

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