February 24, 2022

Setting Financial Goals

Valerie Mellema
Fortune 500 Editorial Contributor

No matter your age, it’s never too early to have a goal, specifically a financial one. These goals can be small, such as saving up for a new video game, or they can be larger, long-term financial goals, such as down payments for houses or cars, retirement savings, or other life-changing purchases that you will make in your life.

But what’s the point? How do you do it? Is it important to set these types of financial goals? The truth of the matter is that, yes, it is important to set (long-term) financial goals. Read on to learn what financial goals are, how to set them (and work towards them), and why they are important.

What Are Financial Goals?

When it comes to financial goals, these are the types of long-term goals that are meant to form a basis or a guideline for a spending/financial plan. The financial plans that have the best chance of success are the ones that you set to align with your objectives, life goals, and personal values.

Financial goals are not the same as a budget, although a budget can help you achieve your financial goals! This is because financial goals are the measurable and extremely specific milestones that you introduce to your life to reach for the future that is most important to you.

To ensure that you’re creating healthy and attainable goals, you must make sure that you have clear, concrete details about the goals. For example, you can’t just say, “I want to improve my credit score.” Not only does that prevent you from having a specific and measurable goal, but it allows you to think, “Eh, I raised it one point, so I technically achieved my goal.”

This vague, wishy-washy “goal,” isn’t going to work for you. Be more specific! Tell yourself that you’re going to improve your credit score by 50 points, and then actively work towards doing so.

Setting Financial Goals

As you have probably gleaned, there are “good” ways to set financial goals and “bad” ways to do so. The best way to set secure financial goals that are going to push you to chase after them – and achieve them! – are to use the following steps as a guideline:

  • Managing your money is another job. Think of your actual job or a normal day at work. During your normal workday, you have things that you must accomplish by a certain deadline and things that you can extend over a few days, right? Your money is the same thing – determine your immediate needs, your later needs, and your needs that are far into the future.
  • When will you need the money? Similar to the last point, ensure that you know if a certain financial goal is a short-term one, a mid-term one, or a long-term one. If it’s a long-term one (such as putting a down payment on a house or car), you will have the most time to work towards it, but you will also have the most time to fall off your path and not stick to your budgeting.
  • Put a timeframe on your goals. Make sure that you have a specific date for when you want to reach your financial goals. This will allow you to figure out a budget and curtail your spending.
  • Rank the priority of your goals. This can help you allocate your money towards the more critical goals, without losing out on the less critical ones. For example, you can allocate 50% of your budget towards a house down payment and 10% toward buying that fancy blazer that caught your eye.
  • Know how much you’ll need to save. Knowing how much you need to save will go a long way towards allowing you to know if your financial goals are feasible or if you’re setting yourself up for failure. If you know that you want to have $10,000 in 10 years, you will know that you need to save $1,000 a year to reach your goal. Make sure you have a goal that you can commit to for that timeframe (in this example, those 10 years).

Why Is It Important to Set Financial Goals?

If you were to Google this same question on the Internet, you would likely end up with a slew of different answers that all, ultimately, lead up to the same thing: having a goal gives you something to work towards, and it can also help you to determine how far along the path to success you are.

If you have a financial goal, there is a very specific monetary number that you are attempting to reach. As such, you will have to look at how much money you are making towards this goal over a given period (e.g., a week, a month, half a year, etc.) and see that you can commit to upholding that rate for however long it takes to reach your goal. To look at it another way, having a financial goal will provide you with a real-life “progress bar” that you can use to see if you’re on the right track towards your goals.
If you are reaching your quota weekly, monthly, or biannually, this means that you are making good progress and that your current methods for your financial goals are working. If you aren’t reaching your quota, you will have to take a look at your finances and find a way to change things so that you can meet your quota.

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