Goals related to your money, how much you earn and how you spend it, are called financial goals. If you don’t have goals for your money, you’ll likely spend it on purchases that don’t improve your financial health. But, if instead, you have a goal of purchasing a new car later this year, saying “no” to impulse purchases might be easier.
While enjoying an occasional financial splurge is permissible and even encouraged, failure to direct your money now towards specific goals might put you in a financial bind if you’re hit with an unexpected bill. It could also mean having to work well past the age you had planned to retire. Financial goals are a sure-fire way to prioritize your spending plan and stop living paycheck to paycheck.
Making more money often comes to mind when people think about financial goals. In reality, financial goals are about more than how much you make. It’s also about how much you keep. Since no two people are the same, it’s okay for your financial goals to differ from a friend, sibling or co-worker. Besides having different priorities, your income, where you live, family status and lifestyle play a large part in determining which financial goals make sense. Your dreams of a comfortable retirement, a new home or a trip to Spain next summer require a plan to make them a reality.
To reach your financial goals, it’s helpful to establish targets or checkpoints along the way. But first, you have to determine how long it will take to reach your goal. Goals are often categorized as short-term or long-term based on the time frame needed to achieve them. Here are a few examples of each.
Different Types of Financial Goals
Short-term Goals (Can usually be reached in less than one years)
- Establish a spending plan within the next 30 days
- Save $1000 for a new couch purchase in six months
Mid-term Goals (one to five years)
- Pay off credit card debt in 12 months
- Save for a wedding or second honeymoon in 18 months
- Build a six-month emergency fund in 24 months
Long-term Goals (Often take longer than five years to reach)
- Save $1 million for retirement
- Contribute $50,000 to a college savings account for my child
- Pay off my mortgage in 20 years
- Move to a new country
The exact length of time that defines a short-term, mid-range or long-term goal isn’t as important as the understanding that some goals, by their very nature, will take longer to achieve than others.
Applying a realistic time limit to achieve the goal allows your efforts to be focused and increases the likelihood of achieving each goal.
How To Achieve Your Financial Goals
You don’t need to try to achieve all your financial dreams at once. Once you’ve identified your financial goals, write them down along with a realistic time frame based on your spending plan. Then, consider what you need to do to make your dreams a reality.
An easy way to increase the chances of achieving a financial goal is to automate the savings process. Electronic transfers into your savings or investment accounts may help you stick to your plan and ultimately reach your financial goals. A monthly review of your spending plan will force you to review the status of your financial goals. You’ll be able to determine at a glance if you’re still on track to meeting your short-term, mid-range, and long-term goals. Stick with a plan to make your financial goals a reality.