A brand new year brings with it resolutions and goals. A financial goal can be anything from getting on the property ladder, saving for your dream holiday or retiring early.
As the saying goes though, a goal without a plan is just a dream. So what are some of the tips and tricks to setting goals and staying committed to achieving them.
In this article, we explain:
- What are financial goals are and why are they so important?
- Why does setting a financial goal matter?
- How do you set realistic goals?
- What are the top 10 financial goals?
What are financial goals?
Financial goals can be short-term objectives, such as saving money for:
- Travel
- A wedding
- Repaying your credit card debt
Consolidating your debt using a balance transfer card could help you repay what you owe faster but make sure you understand the small print and have a repayment plan in place.
Longer-term, big financial goals could be to:
- Achieve financial security and retire early
- Hit a certain amount in your pension pot by the time you retire
Saving for a deposit for a house can be a short, medium or longer term goal, depending on when you plan to buy.
Goals are very personal and depend on your stage in life, your ambitions, commitments, as well as your personal finances.
The idea is that if you can identify what your objectives are, you are better able to draw up a strategy to reach those goals. It is equally important that you check in on your financial situation and plans to ensure you are still on track.
Why financial goals matter
Let’s say your goal is to have a retirement plan that allows you to live comfortably in your older years, in a nice house and ensure your children have a stable future.
Goal setting crystallises those aims, making it easier to visualise something that could be very far away, giving you focus and motivation.
- A goal sets you off in a certain direction, so you are better able to create financial plans that you can follow, reducing the chance of failure.
- Knowing your aims enables you to work out roughly how much money you might need to save in order to achieve those aims.
- Sharing that goal with others, such as your family and friends, can offer extra support and ease the pressure on spending money when together
- You will also be able to track your progress and measure your success, giving a sense of achievement.
The aim is to be in control of your money, so it doesn’t control you. Your future self will thank you for it.
How to set realistic financial goals
Setting realistic financial goals is important. Of course the dream is to be a millionaire by the time we’re 25 and retire at 35, but having a more realistic objective means you are more likely to achieve it.
Saying that, while your goals should be affordable and practical, they should also push you a little bit.
Here are some tips:
- You can speak to an independent financial adviser who will help you map out your life from a financial perspective. They will play out “what if?” scenarios to test the resilience of your plan, such as, what if the stock market crashes? What if I have children? What if my income streams are affected?
- If you don’t want to see a financial adviser yet or you don’t have the money, you can take on the role yourself and ask yourself the same questions: what would I like to achieve – and be specific about it.
- Try to think about short term financial goals such as:
- paying off expensive debt
- increasing your credit score
- building up 3-6 months of essential outgoings in cash in an easy-access savings account for emergencies
- Think about a longer-term objective such as overpaying your mortgage by a set amount each month so you can be debt-free sooner. Most long-term financial goals would relate to increasing your retirement accounts.
Look at your current financial situation and draw up a budget. Knowing how much you have coming in and going out, will give you a clearer idea of how much extra money you can set aside to commit to your goals.
Work out ways to cut back but also methods to increase your income such as asking for a pay rise, ensuring you are getting all the benefits you are entitled to and exploring side hustles.
And don’t just think about the now – think about your earnings in the future and your possible financial commitments. For example, if starting a family is on your mind that is something to factor in.