How To Achieve Money Goals
4-minute readSeptember 21, 2020
One of the great things about the new year is that people start evaluating how their lives are going and what they want to do differently. Say you’re not happy with where your finances are at this point … there’s no better time than now to set some new money goals.
Setting and reaching your personal financial goals is the best way to ensure that you can live the kind of life you want, both now and in retirement. Let’s look more closely at what financial goals are and how you can set and achieve them for yourself.
What Are Financial Goals?
Financial goals are guidelines you set about how you’ll manage, spend and save your money. Setting financial goals makes it more likely you’ll achieve the things you want later in life.
There are many different types of financial goals you’ll set, but most will either qualify as short-term goals or long-term goals. Let’s look at an overview of both types of goals.
Short-Term Financial Goals
Short-term financial goals are things you want to accomplish in a relatively short period. This could be things like paying off the remaining balance on your credit card or saving for a vacation.
Many people find it easier to stay motivated to work toward short-term financial goals. That’s because you’ll see the result of your actions much sooner than you will with long-term goals.
Long-Term Financial Goals
Long-term financial goals are things you’re trying to accomplish over a longer period, like saving for your retirement or paying off your home.
It can be harder to get started on long-term financial goals since you don’t see the benefits immediately. That’s why 48% of adults aren’t saving anything toward their retirement. Everyone knows that the earlier you start saving for retirement, the better, but it’s harder to do since you don’t see the immediate effects of that decision.
The Top 5 Financial Goal Examples
If you’ve never set money goals for yourself before, you may be wondering where to begin. Listed below are five different financial goal examples you can consider setting for yourself.
1. Paying Off Debt
If you have any ongoing debt, it’s a good idea to start thinking about how you’re going to pay that off. This is especially true if you have high-interest credit card debt.
Failing to pay off your credit card balance in full at the end of every month can cost you hundreds or even thousands of dollars in interest. And many people unintentionally fall into a cycle of credit debt where they are paying down their balances only to rack them up again the next month.
2. Saving For Retirement
The number one long-term financial goal you should set for yourself is saving for retirement. And the earlier you get started on this process, the more comfortable you’ll be in your later years.
When it comes to saving for retirement, you should aim to put away 10% – 15% of every paycheck in a tax-advantaged retirement account. A 401(k), 403(b), or Roth IRA are good places to start.
3. Building an Emergency Fund
Many people fall off track with their savings goals because unexpected emergencies arise, and they don’t have the money to cover them. So they end up putting that money on a high-interest credit card.
That’s why it’s important to start building an emergency fund with enough money to cover up to 6 months’ worth of expenses. That way, you won’t be caught off guard when unplanned expenses crop up.
4. Buying a Home
Buying a home is one of the best financial goals you can set for yourself. When you own your home, you’re investing your money in the equity in your house instead of throwing it away on rent. Aim to save at least 20% for your down payment, so you don’t have to pay for primary mortgage insurance.
5. Feeling Financially Secure
This goal is less concrete than some of the others on this list, but you need to think about it. What does financial security look like for your family?
Does this mean you’ll be able to pay for your children’s college, so they don’t have to take out student loans? Does this mean you’ll be debt-free? Knowing what financial security looks like to you will make it easier to set and achieve your money goals.
How To Create A Plan For Reaching Your Money Goals
So now that you understand what short-term and long-term money goals are, how can you create a plan to reach them? Here are four simple steps to help you get started.
1. Make Smarter Spending Decisions
The best place to start is by budgeting and using the money you already have more wisely. By creating a spending plan and cutting your expenses wherever possible, you’ll be able to find more money without actually making more.
2. Pay Off Your Debt
Make a list of your outstanding debt and come up with a plan to pay it off. Many people find the debt snowball method to be one of the most effective ways to pay off debt.
With the debt snowball method, you pay off your smallest debt first until it’s gone. Then you’ll take that money and apply it to the next largest debt on your list. You continue with this process until all your debt is paid off completely.
3. Start Saving For Retirement
Saving for a down payment on your home and building an emergency fund is important, but saving for retirement is vital. If you put off saving for retirement, you’re losing out on the benefits of compound interest.
So find a way to start putting 10% – 15% of your paycheck toward your retirement savings today. 20 years from now, you’ll be glad you did!
4. Maintain A Strong Credit Report
And finally, maintaining a strong credit report will make it easier for you to accomplish your financial goals. A high credit score will help you qualify for the most favorable rates and can even make it easier for you to get hired.
You can use Rocket HQSM to review and track your credit score. That way, you can see what areas you need to improve in.
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How to Set Up An Emergency Fund
Are you one of the many U.S. consumers who don’t have an emergency fund? It’s time to start building one before an unexpected financial emergency forces you to run up your credit card debt or turn to a high interest rate personal loan.
10 Ways To Save Money This Year
Saving money isn’t as difficult as you might think. It’s all about starting slow, setting goals and being willing to sacrifice a bit. Follow these 10 savings-boosting tips and you might be surprised at how fast your money grows.