Tailoring Your Financial Plan
When it comes to personal finance, everyone’s situation is unique. No one has the same bills, rent, debts, or lifestyle. When you’re ready to take control of your financial lifestyle, you need a plan that will answer your specific problems.
At credit.org, our trained financial counselors are ready to review your unique situation and help you plan your path to financial freedom. The first step to tackling these problems is to set financial goals.
What is a Financial Goal?
Setting Measurable and Specific Targets
A financial goal is a target set when you manage your money and make financial decisions. It can involve saving plans, spending limits, earning, or even investing.
Creating a list of financial goals is vital to creating a budget. When you have a clear picture of what you’re aiming for, working towards your money goals is easy. That means that your specific financial goals should be measurable, specific, and time-oriented.
Types of Financial Goals
Distinguishing Short, Mid, and Long-Term Financial Goals
There are several types of financial goals:
Short-term financial goals
Short-term financial goals are smaller financial targets that can be reached within a year. This includes things like a new television, computer, or family vacation.
Mid-term financial goals
Typically, mid-term goals take about five years to achieve. A little more expensive than an everyday goal, they are still achievable with discipline and hard work. Paying off an unexpected expense, paying off debt, personal loans, or saving for a down payment on a new car are all mid-term goals.
Long-term financial goals
This type of goal usually takes much more than 5 years to achieve. Some examples of long-term goals include saving for a college education, a retirement plan, to build an emergency fund, or a new home.
7 Examples of Personal Finance Goals
Practical Goals for Financial Well-being
Still not sure what to aim for? Here are the most common financial goals to help get you started.
1. Start an Emergency Fund
Life is unpredictable, and it’s important to be prepared with an emergency fund. Saving for emergencies is one of the only money goals that is a necessity. It should be the first one you set, regardless of your financial situation.
It’s up to you to decide what qualifies as an emergency fund. There are a lot of different financial situations that can fall into this category, including:
- Medical expenses
- Job loss
- Accidents
- Broken appliances
- Car repair
When an unexpected expense occurs, emergency savings are there to keep you from money-related stress.
How much you save toward an emergency fund will vary. Statistically, it takes 9 months on average to find a new job after a layoff. It is in your best interest to save roughly 9 months’ worth of income for emergencies.
2. Pay Off Debt
Paying off debt is one of the most common financial goals. No one feels comfortable knowing that they owe large sums of money. The amount you owe is already a specific number; paying off debt can easily be translated into a financial goal.
In addition to making every monthly payment, the best way to make real progress is to stop borrowing more money. Adding to your debt will only push you away from your goal, so it’s important to stay strong and diligent. In some cases, this goal is probably a mid-term goal, but there are ways to get out of debt fast.
3. Save for Retirement Plan
Saving for retirement needs is a goal you may be working towards your entire life. It is the perfect example of long-term goals.
It is important to consider exactly what your retirement needs are. Setting up a 401(k) or other retirement plan is the most lucrative way to save for your future.
Remember, the earlier you start, the better off you’ll be in the end.
4. Strive for Homeownership
Buying a home is a common long-term financial goal. Whether you’re saving for a down payment or working to pay off a mortgage, homeownership is one of the largest financial investing targets to aim for.
Saving up a sizable down payment is the best way to get a reasonable home loan. If you save enough money, you can avoid the cost of Private Mortgage Insurance, which will save you even more money.
5. Pay Off the Car
Having a monthly car payment is not a staple in life. A great example of mid-term financial goals is paying off a car loan. While somewhat sizable, paying off the balance should only take a few years.
Once you’ve completed paying off your auto loan, don’t run straight back to the dealership. Take the opportunity to use those loan payments for other bills or savings. You’ve already finished one debt – there’s no reason to hop into loan payments right away. It’s important to know the best time to sell or trade in your car to make the most of your investment.
Continue to drive your old car until you have a sizable down payment for the next one. Make it your goal to pay for your next car in full, without borrowing at all.
6. Invest in a College Education Savings Account
Unfortunately, due to the increasing cost of college, paying off student loans has become a modern long-term goal. Whether you’re a student paying off your own balance or a parent, saving for your child’s education, college tuition is easily a substantial goal to base your budget on.
7. Save Money, Plan for Fun
While most financial goals are oriented around being responsible, you should always try to aim for one “fun” goal. This could be a vacation, a big-screen TV, a boat, or any other unnecessary thing that you simply want.
If you work hard and save diligently, you deserve to reward yourself with fun savings goals. Plus, working towards something you truly want is a great way to practice self-discipline and goal setting.
Overcoming Financial Uncertainty with Clear Goals
Not having financial goals can lead to stress and uncertainty. It's like navigating without a map. This blog covers the importance of setting specific, measurable financial targets, whether they are short, mid, or long-term. From starting an emergency fund to paying off debts and saving for retirement or homeownership, each goal is a step towards financial stability. By investing in education and even planning for enjoyable pursuits, you can balance responsibility with pleasure. Remember, clear financial goals are your roadmap to a secure and fulfilling financial future
Need Help Defining Your Financial Goals?
No matter what your financial situation is, our financial counselors are ready to help you reach your goals. Contact us today and start your path to financial freedom.
