We all know that if you want to achieve something, it’s better to set goals. But few Americans actually set financial goals or know how to set them. According to Schwab Modern Wealth Indexonly 33% of people have any written plans or goals.
What’s worse? of financial health network It turns out that only 29% of Americans are financially healthy.
Hmm…you probably don’t need high level calculus to understand that there is a correlation. Having financial goals will help you do well financially.
Financial goals help you feel better and do better
Financial goals and plans allow you to:
Stop worrying and be more confident
According to a report by the American Psychiatric Association, 70% of adults worry about money. Setting goals has been proven to reduce financial stress and keep you on track for the future you want.
Schwab research found that people who have a plan are at least 25% more likely to feel financially secure.
Avoid problems and create wealth
The more you can achieve your goals, the more problems you can avoid and the more wealth you can create. By setting goals and creating a financial plan, you can better manage your taxes, savings, and more.
And when disaster strikes, you’ll be better able to weather the storm. In fact, people who have a holistic financial plan are 32% more likely to have an emergency fund.
Here are some people who have set goals and written plans:
- Almost 20% more likely to avoid debt problems
- 31% more likely to consider risk tolerance when investing and set themselves up for success
- 26% more likely to recognize and avoid fees and investment costs
- 24% more likely to rebalance regularly
make better decisions
Every financial decision you make affects your money, not just today, but for the rest of your life. By making these decisions in light of your short-term and long-term goals, you are more likely to be successful and happy.
There are four types of financial goals
Any financial goal is fine, but you’ll get better results if you set goals in all of the following categories:
- Process-oriented financial goals
- short term financial goals
- Medium-term financial goals
- long term financial goals
Keep reading to learn more about personal financial goals in all of these categories.
1. Process-oriented financial goals
Process-oriented goals are not about “what” you want to accomplish, but about “how” you accomplish something. A process-oriented goal is a goal that sets out how you want to proceed toward achieving your goal.
Therefore, setting process-oriented financial goals is success. Helps you build habits for wealth and security.
You can set process-oriented goals around who, what, when, where, and why questions.
A. What and where: Establish the system
What type of system do you want to set up to track and manage your savings, spending, and income goals? Spreadsheet? Note? A planning system like Boldin Retirement Planner?
B. When: Set the time period
How often do you want to check your key financial metrics? Some people reconcile their accounts daily, others monthly, quarterly, or even semi-annually or annually.
The more often the better. Make financial planning a habit!
C. Who: Obtain household buy-in
If you are single and have no family, financial planning is easier.
When making your plans, you need the consent of everyone who will or may incur any costs to you in the future.
Most importantly, you need to plan with your spouse. Here are eight topics to address if you want to survive retirement with your spouse.
2. Short-term financial goals
Short-term financial goals are things you can accomplish starting today, even if you can cross something off your list today, over the next few months.
Here are seven important short-term financial goals.
A. Build an emergency fund
Having an emergency fund (3 months to 1 year’s worth of income in cash) is key to living a financially healthy life.
An emergency fund is very important to avoid accumulating debt or having to make compromising decisions if things go awry.
Learn more about how to create an emergency fund and why it’s so important. Or learn about the best (and worst) sources of emergency funds.
B. Develop a habit of monitoring and learning
The most actionable thing you can do to improve your financial outlook is to develop good financial habits. Often, this means setting aside an hour each week to learn about money. Use this time to evaluate your budget, review your savings, and learn about your personal finances.
C. Set goals to set goals: Determine your short- and long-term financial needs and desires
Do you know how much you need to retire? How much money should you have in your emergency fund? How much does it cost to send a child to college, help pay for long-term care for a parent, buy a home or vacation home, finance medical care, or pay for a vacation you really want? Does it cost anything?
Maybe none of these apply to you. However, something is needed in the future.
It is very important to know right now how much money you need to live the life you want to live.
Do you have trouble visualizing your future hopes and needs? Here are 7 ways to imagine the future you want.
Once you know what you want, the Boldin Retirement Planner can help you see the numbers you need to reach and create a comfortable plan to reach your goals. See if you’re on track and get lots of ideas to make better decisions.
D. Increase your savings rate if necessary
Once you have determined your short-term and long-term financial needs, you may find that you need to save more. Plan to increase your savings, perhaps gradually over time. For goal setting to be achievable and meaningful, it must be specific and detailed. For example, you could say you’re going to save an extra $5 every day, or you’re going to save $500 a month, put 50% of it toward retirement, and put the rest toward other savings goals.
Automation: Not sure how to save more? Automating your savings is one of the best things you can do now to set yourself up for a better future. Automating your savings (especially if you schedule your raises to coincide with your salary increase) will ensure that you save.
Want more money-saving tips?Here are 22 smart and easy ways to significantly increase your savings.
E. Set a monthly budget
Tracking how you spend your money is an important component of financial well-being. A budget can help you:
- Manage your spending
- achieve your goals
- save money
- reduce stress
- give a sense of control
You don’t have to set a strict budget. Just write down how much you earned, how much you spent on what (on what), and how much you saved. Make sure your expenses (including savings) are less than your income.
F. Make an investment plan
It’s not enough just to save money. They need to be able to invest efficiently and appropriately based on their individual circumstances, including their age, risk profile, needs, and time horizon.
An investment plan is not about actively trading stocks. An investment plan is a thoughtful document that outlines your savings goals, strategies for achieving those goals, a framework for changing your investment plan, and options for what to do if things don’t go as expected.
Investment planning is one of the best short-term financial goals because it leads to long-term success.
Learn more about preparing an investment policy statement. Or, set up a free discovery session with a paid financial advisor to assess how we can help you set up investments you can manage on your own.
G. Do you have any debt? make a plan to get rid of it
Just as you plan to save more and invest strategically, you should also set goals for eliminating debt, especially high-interest credit card and student loan debt. Here’s how to pay off your debt. 12 ways to cut this expense for long-term prosperity.
We also highly recommend tracking your debt in the Boldin Retirement Planner and running through scenarios to accelerate debt repayment. See what happens to your lifetime wealth and security. This exercise is powerful, fun, and highly motivating.
3. Medium-term financial goals
Depending on the trade-offs you make, it could take the next five years or less to reach your medium-term financial goals.
A. Improve your credit score
Credit rating agencies and other services can provide good tips for improving your credit score. A good credit score helps you get a loan on favorable terms.
Your credit score is especially important if you plan on purchasing real estate in the future. However, your credit score can also affect the interest and insurance premiums you pay on your credit card.
B. Create a long-term tax plan
Developing a long-term tax strategy can make your retirement more secure and allow you to keep more of your hard-earned money.
With the Boldin Retirement Planner, you can see your potential tax liability for the next few years and get ideas for minimizing this expense. It takes some forethought, but strategic steps like Roth conversions and shifting your taxable income can lead to significant savings over your lifetime.
C. Think carefully about how you want to spend your time
There is a limit to the amount of money you can earn over your lifetime. Similarly, the amount of time you can spend is limited.
How you want to spend your time is very important when considering your financial goals. Would you like to:
- Would you like to work more to increase your income so you can get ahead and save more?
- Why not re-enter the workforce to further improve your chances of retiring early?
- I’m enjoying life now, but I would like to work a little more (which may not be a big deal if you really enjoy your job).
- Do you want to drastically reduce your spending and remove as much savings as possible?
Your income, what you spend, and what you save are all about both financial and lifestyle choices.
D. Eliminate debt
If you set short-term goals to create a debt-free plan, your medium-term goal is to eliminate debt from your life.
Debt is a major threat to your financial well-being. It is acceptable to borrow money for things that are useful to you, such as a mortgage or a car (especially at low interest rates). But credit cards and other high-interest debt can be like setting your money on fire.
E. Please retire early!
yes. Regardless of your age, it is entirely possible to plan for retirement in the medium term.
Retire young: You may want to learn about Financial Independence, Retire Early (FIRE). At its core, FIRE is about making important lifestyle choices now to accumulate significant savings so you don’t have to work. FIRE advocates are retired in their 20s and 30s. Click here to learn more about FIRE.
Retirees from middle age to under 65: About half of Americans take early retirement, usually by age 61, but many people quit their jobs in their 50s. And with some planning, you can achieve this goal. Here are some resources to help you plan.
4. Long-term financial goals
There are two important long-term financial goals.
A. Retire or achieve financial independence
Once you have saved enough money and have enough income to last you the rest of your life, you can retire, no matter how long it takes.
However, even as you move towards retirement, there are still goals and metrics to achieve. you want to:
- Create a retirement drawdown plan for your assets. Instead of thinking about how to save, you need to decide on the most efficient way to spend.
- Investment plans may evolve
- Taxes, medical bills, long-term care planning, and the various Plans B, C, and D that might not go as planned are all critical to a secure future
- You need a retirement income plan, and ideally you need to find a way to guarantee that income for the lifetime of both you and your spouse.
- And many more…
B. Leaving property to heirs
In addition to retirement, another long-term goal that many people have is to leave something to their heirs. It’s either money or, in many cases, a home.
Track and manage your short, medium, and long-term goals, including seeing what legacy you can leave behind, with Boldin Retirement Planner.
