How to Set Financial Goals and Achieve Them
This is the time when we think about what we want to accomplish in the new year. Many of us will aspire to lose weight, obtain a promotion at work, or even travel more. Yet few people understand the importance of making new year financial resolutions.
While money can’t buy happiness, managing your finances properly allows you to focus less on dollar signs and more on actually enjoying your life.
Continue reading as we take a closer look at financial goals and how to achieve them.
What are financial goals?
We get it — the thought of a financial goal sounds scary. A recent college graduate searching for their first “adult” job will likely be overwhelmed at the idea of retirement. Similarly, someone with significant consumer debt may want to rethink their plan of buying a house until they pay off their credit cards.
InCharge Debt Solutions defines financial goals as “savings, investment, or spending targets you hope to achieve over a set period of time.” Additionally, your life stage often points you in the right direction when it comes to financial goals. In the first example above, the soon-to-be professional might be better off paying down their student loans rather than stressing over an event that’s decades away.
Keep in mind that financial goals don’t always have to be major milestones involving thousands of dollars. A 10-year-old, for example, could save their allowance for several months to buy a toy. There’s also the possibility of a middle-aged adult earmarking funds from their paycheck for a vacation or new hobby.
Why are they important?
Financial goals change the way we think about money. Those saving for a house will probably start finding ways to put extra money toward their down payment fund. Small lifestyle changes such as brewing our own coffee or bringing lunch to work help us to achieve these goals faster.
Dave Ramsey says that “the way you interact with your money today will impact your future.” But don’t assume you’ll have the ability to flip a switch in the new year and be in total control of your finances. People who achieve money-related goals are the ones who create a detailed plan beforehand and maintain their discipline from beginning to end.
Tips for setting financial goals
A quick online search shows countless results for “being better with money.” This isn’t a tangible goal, though. Sure, it might be a starting point, but the reality is that everyone’s financial situations are different.
So do yourself a favor and develop what’s called a SMART (specific, measurable, achievable, relevant, and time) strategy.
Let’s revisit the home buying scenario. You’ve done some quick research on low down payment options, such as FHA and VA loans. Perhaps you’ve explored assistance in the form of gift money from a loved one.
In the meantime, you’ve decided to start a down payment fund. By reworking your budget and limiting unnecessary purchases, you’re able to free up $500 a month to go toward a home purchase. Now that’s a specific financial goal if you ask us.
Make them measurable
Maybe your lone remaining debt is your mortgage. Why not come up with a plan to pay down the balance in a shorter amount of time? You can do so by having a measurable goal.
For some homeowners, this could mean making one or two extra principal payments on their mortgage. Borrowers with greater financial stability may go the route of a 15-year mortgage and potentially save hundreds of thousands of dollars over the course of the loan.
Make them achievable
It’s easy to get overzealous as you work through your financial goals. Remember that changing your money mindset takes time and a willingness to adapt. You’ll likely need to account for various life events (having a baby, getting married, etc.) and the occasional unexpected expense (car repairs, emergency room trip, etc.).
It’s critical for home buyers especially to have achievable goals. Though it would be incredible to land your dream house within the first few years of your working life, a starter home could be the more sensible choice.
Make them relevant to your life
Again, no two financial goals are the same. Basic money management tips include establishing a budget, getting rid of high-interest debt, and building an emergency fund. From there, you can focus on home buying opportunities and any retirement accounts.
Make them time-sensitive
Ask yourself when you wish to achieve this goal. Obviously, you’re going to check off certain milestones much sooner than others. In any case, a deadline keeps you on track.
Types of financial goals
The team at American Financing understands the different types of financial goals, both short-term and long-term. Whether it’s saving money through a mortgage refinance or moving into your forever home, we always have your best interest in mind.
Give us a call at (800) 910-4055.