How to Set Achievable Financial Goals
5 mins read
20 days ago
How often do you find yourself thinking about money? It probably crosses your mind at least once a day. Maybe you make a mental list of all the things you need money for, all the things you want money for and how you can afford all of those things on your lists. Think of those mental lists as rough sketches of your financial goals.
What are financial goals?
Financial goals are objectives or targets that you hope to achieve at a specific time. They could be anything from taking a baecation to saving up for your rent, buying new Nike boots and securing an emergency stash. Financial goals are priorities that you want your money to cover and they could be things you actually need and also things you don’t really need but would be nice to have, like that fifth pair of shoes you’re only buying to fill up the extra space in your closet.
Short and long term financial goals
Financial goals can be short-term or long-term. Short term financial goals are immediate goals that you hope to achieve in a few days, weeks and sometimes months. Examples are saving up to buy some furniture for your new apartment, setting up an emergency stash, paying off some debt. Long term goals on the other hand are goals that you hope to achieve really far off in the future. Some examples of long term goals could be setting up a trust fund for your children, investment plans, starting a company and planning for retirement.
In this article, we are going to talk about what it means to set up achievable financial goals and the simple ways to do that.
Importance of setting up financial goals
- To create a roadmap
Setting financial goals helps you create a roadmap for your life. It helps you answer questions like: Where are you going? What would you like to do? Where do you see yourself in the next ten years? How financially stable do you want to be by the time you’re 50?
Putting together financial goals helps you determine where you want to be and it equally helps you figure out how you are going to get there. If you want to be financially free and sunbathing at a beach in Malibu when you are 50, what do you have to start doing now? What plans do you need to start making and what decisions do you have to take?
- To plan savings and budgeting
If you have a financial goal to pay your rent at least a month earlier than usual, you would need to sit down and properly assess your finances. How much money do you make every month and how much of it gets eaten up by expenses? If you needed to pay your rent annually, how much money would you need to save every month to meet up with that goal?
By thinking about this, you would be able to properly align your finance to accommodate that goal. Assessing your finances would tell you if you needed to cut back on some expenses in order to be able to make up for the rent in time or it would let you know if you were just fine.
- To aid better financial understanding
These goals prompt you to make plans and while you are making those plans you start to learn and realise a lot of things you probably wouldn’t have. For one, you are able to see where all your income comes from; you need this to set realistic goals and make strategic plans.
You also learn to be intentional about your finances, what you spend, what you save, what you put away for investments and emergencies. You could also learn to cut back on some habits that could have you spending excessively on things that you do not need.
How to set achievable financial goals
While setting goals, it is important to be as real as possible with the targets and objectives that you set as well as the timelines. A major reason why people don’t accomplish their goals is because they set goals and timelines for those goals that do not tally with their reality. For example, someone who sets a goal to save at least 70% of their monthly salary so they are able to rent at one of the high brow areas when they have a ton of other pressing expenses would probably not be successful at achieving that goal. To accomplish your financial goals, they have to be SMART.
Write down your goals (Specific)
You have to be specific about your financial goals. Take note of every aspect of that goal and how you intend to achieve it. A goal that says ‘save money’ isn’t very specific. It doesn’t state why you are saving money or how you are going to save money. A better way to put it would be to say “save 500,000 to go on a vacation with friends by September. I can save this much if I save 100,000 every month for the next five months”.
Also, it can be helpful to not just type your goals on a smartphone or digital memo but also write them down. Writing goals down have been noted to come with certain benefits, including motivation to see it through.
Quantify your goals (Measurable)
Make your goals easier to track by adding numbers and quantifying them. You need a certain amount of money to buy those Nike shoes. How much do the shoes cost and how much do you have to save and at what progression? All of this helps you keep track of your goal and how close or far you are to accomplishing them.
Here, creating a budget will help you know how much money is coming in and how much is going out. It’s also how you know what expenses are taking up most of your income, what expenses are necessary and those that aren’t. By setting a budget, you can tell how much money you can afford to put away for your rent, personal needs, an investment plan or your retirement income.
Align your goals with your reality (Achievable)
In order to set goals that you can achieve you have to be honest about where you are and where you want to be and what it will take to get there. What goals are short-term and what goals are long-term? What goals can you reasonably achieve and what goals are you certain would fall through?
Set realistic goals. The last thing you want to do is set yourself up for disappointment. Think carefully about your goals and then think long and hard about the ways you want to and the ways you can achieve those goals and then use that to determine what is achievable and what is not.
Find your 'why' (Relevant)
It is important to know your objectives for setting a particular goal and what you hope to achieve with those goals. Finding the why helps you get clarity but it also helps you gather motivation. For instance, why do you want to have a diversified investment portfolio before you are 50? How does that goal align with your life plan? In what ways is it important and why? These are some questions to ask to determine how relevant your goals are.
Knowing that you are saving 500,000 for a small getaway with friends, for example, keeps you on track to achieve the set goal. In this case, you know what the goal is for, why you have set it up and the thought of a getaway with friends keeps you pushing to make that goal a reality.
Be time-conscious (Timely)
You cannot measure the success or progress of the goals you have set for yourself if there are no deadlines. Financial goals should not have an infinite date. To set goals, you should decide at what time you can reasonably achieve your goals, put time on it and track your progress.
it’s important to set financial goals because they give you a clearer perspective of where you want to be and they give you a better understanding of your finances. Remember to set SMART goals and to be intentional about the strategies that you use to accomplish your goals.
Disclaimer: This article is meant to provide general guidance and understanding of cryptocurrency and the Blockchain network. It’s not an exhaustive list and should not be taken as financial advice. Yellow Card Academy is not responsible for your investment decisions.
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