What Are Financial Goals, Anyway?
As a young adult it often feels like everyone is telling you to do this or do that with your money. You have to set up a budget, and you have to save for retirement, and you have to build good credit, and don’t forget to jump around on one foot and do the hula…er, sorry, wrong set of directions. Anyway, with all those suggestions out there about how you should handle your money, it can be really hard to determine which steps you should take and when you should take them.
Before you get overwhelmed and decide that doing nothing is easier than trying to make a decision, look at your financial goals to help you decide what your best course of action should be. The best place to start is by differentiating between your financial goals and your financial dreams. Financial dreams are things that you hope will happen, but you take very little or no action in pursuing. For example, you may dream of being a millionaire, but the only step you take to achieve that dream is to buy a lottery ticket. Financial goals, however, are things that you plan for and take an active role in bringing to fruition.
Your financial goals should account for four things:
1) What you plan to accomplish
2) How long it will take
3) What you will need to do in order to make it happen
4) How to fit the goal into your personal finances
Also make sure when you’re setting your goals, you set goals for a series of time periods—from short-term (0-6 months), to medium-term (6 months-1 year), to long-term (1 year+).
Now, you may be saying to yourself, “Yeah, now I know how to set financial goals, but how am I supposed to figure out what kind of financial goals to set?" Some of the more common financial goals revolve around budgeting, saving, and getting out of debt. For example, perhaps you choose to pursue a short-term budgeting goal. You may decide to set up and follow a budget or start tracking and lowering your monthly expenses.
You could also set a goal to get out of debt. This will generally be a short-term to a medium-term goal. You may consider setting up a debt payment plan, paying off your old debt, or using your credit cards more wisely. You can also choose long-term goals that revolve around saving money for retirement. Keep in mind that retirement saving can be a little more complicated, so you may need to speak to a financial planner to determine the best route to achieve your retirement-savings goals.
It’s also important to have several goals that you can work on at once, and to be realistic when you’re setting your goals. You can’t set a goal to save $1 million dollars in a year if you only make $35,000 per year.
Setting financial goals is a great way to get started on building healthy financial habits. Whether you decide to save more money, budget your money, or plan for the future, setting financial goals will help keep you on track and organized in your financial endeavors.