Are you tired of feeling financially unstable? Do you want to take charge of your money and work toward a more secure and stable financial future? If so, setting financial goals is one of the most important things you can do to reach your long-term financial goals and improve your financial health.
In this post, we’ll talk about why it’s important to set financial goals, how to do it right, and what goals you might want to consider.
This is one post you want to save for later because setting goals is not just for the new year and can be done throughout the year.
A financial goal is a specific target you set for your personal finances to improve your financial stability and security and reach your long-term financial goals.
Financial goals can be short-term or long-term, and they can cover a wide range of things; for example, short-term goals can include paying off credit card or other high-interest debt, making and sticking to a budget, getting a raise or a side job to make extra money, improving your financial decisions while a long term goal can be saving for retirement or financial freedom, increasing your net worth, building a savings account for big purchases, etc.
It Improves your finances
Setting financial goals can help you improve your finances. For example, by setting a goal to build an emergency fund, you can build up a financial cushion to help you pay for unexpected expenses or emergencies.
In the same way, if you pay more than the minimum payment on your debt you end up paying off your debt early saving you on interest payments and freeing up your income to save and invest.
It Can help achieve long-term goals
Setting financial goals can also help you reach long-term goals, like investing in retirement accounts or buying a house. You can take small steps toward your long-term financial goals by setting clear, measurable goals and planning to reach them.
It Increases your sense of control and accomplishment
Lastly, setting financial goals can help you feel more in charge of your financial future and proud of your progress
Setting financial goals is a good thing and a key step to improving your finances in many ways.
Both short-term and long-term goals are important to think about. Your short-term goals can be reached in a year or less, while long-term goals may take more than a year.
Before we go into the how, If you have a partner, it’s a good idea to set financial goals together can be fun and good for your relationship and finances.
Working as a team is an easy way to reach your goals faster and strengthen your relationship.
I use (W SMART), which is a spin on the SMART goal framework to set financial goals that are effective and achievable.
Before you can set financial goals, you need to know why you want to reach them. In other words, you need to know what you want and how important things are.
Try asking yourself these questions to get clear on your “why”:
Answering these questions can help you figure out what drives you and what you value most regarding your money.
People rarely reach their goals when they set unclear ones. For example, I want to get better at handling money. this is vague. What does that mean to you? Break it down!
Your goal should be clear and specific so you know exactly what you’re working toward.
Here are a couple of examples
You should be able to track your progress and know when you’ve reached your specific goal. In the above example, the goal is also measurable.
Your goal should be something you can reach with the money and resources you have now. If your aim is overly ambitious, you may grow frustrated and quit, but at the same time, it should be challenging.
The right balance should be something that feels like you are a little afraid of your goals, but not too much that you give up on them.
Your individual goals should be relevant to your overall financial goals and the “why” we discussed earlier.
Your goal should have a deadline so that you have a sense of urgency and can work towards achieving it in a specific time frame. This deadline should be reasonable but also hard.
Putting a time limit on it also gives you a way to measure it. For example, if you want to use up all of your ISA allowance (£20,000) this year, you would divide £20,000 by 12 and put away £1,667 each month.
Lastly, it would be best if you made a plan for how you will reach each goal. A goal with no plan is just a wish. You will only reach your goal if you plan how to get there. It will never happen. By making a detailed plan, you can take real steps toward your financial goals.
Here are some ideas of the top financial goals people set and you might want to set for the new year:
These are some examples of financial goals or financial resolutions you may want to consider.
Let’s look at how Tobi set financial goals last year and reached them.
Tobi had always needed help keeping track of her money. She lived paycheck to paycheck and had trouble saving money, let alone paying off her credit card debt. She decided she had to do something different.
A goal with no plan is just a wish
So, she sat down and listed the financial goals she wanted to reach and saving for the down payment on a house was at the top of the list. She decided to save £500 per month. She knew this would be hard, but she was determined to do it.
To reach her goals she started by making a personal budget. She knew this was an important step toward reaching her other financial goals.
Next, she set up an automatic payment of £500 from her bank account to a lifetime ISA. She also saw that making a budget and sticking to it helped her control her spending habits.
Tobi also started looking for ways to make more money outside of nursing and decided the best way to achieve this was to sell digital products on ETSY as a side gig.
It wasn’t always easy, and there were times when all she wanted to do was relax and spend money, but she was determined to reach her financial goals.
She kept track of her progress and made changes as needed. When she ran into problems, she didn’t give up. At the end of the year, when she saw how far she had come toward her goal of buying a house, she felt proud of herself.
She plans to continue saving toward her larger goals in the coming year.
Automating your savings and payments is one of the easiest ways to stay on track with your financial goals. Setting up these tasks to run automatically allows you to save money and pay down debts without remembering to do it yourself.
If you need help meeting your financial goals or are feeling overwhelmed, ask for help from a financial planner or financial advisor, read books, listen to podcasts, etc.
Create a vision board to picture your financial goals. It could be a physical or digital board you can put on your laptop or other screens you use often. Making a vision board can make your goals more real and keep you motivated and on track to reach them.
It’s important to track your progress and make changes as needed. For example, if you’re making less progress than you’d like, you may need to change your goals or plan to reach them. On the other hand, if you’re making more progress than you thought you would, you should set more challenging goals.
Lastly, be gracious to yourself if you are making less progress than you’d like. Getting to your financial goals takes time and hard work, and facing setbacks and problems is normal. Remember to be patient and keep working toward your goals; you’ll get there in the end.
Overall, if you follow these tips and are consistent and disciplined, you can increase your chances of reaching your financial goals and building a more secure and stable financial future.
So, if you want a financially successful year, this is a great time to start setting goals, and you’ve already taken the first step by reading this blog post.
Check out all the posts on this site for more information. I hope you have many wins this year and to that, with my glass raised, have a Great Year. 🥂
