Finances are one of the essential things in a person's life. In this material world, everything requires you to have money, even to get accepted in society. Yes, Sad state of affairs! But have you ever wondered how you could balance these finances? Setting financial goals is one of the crucial things that everyone should know. It doesn't matter how much or how little you earn. Setting financial goals will help you out with everything and make things easier for you. Considering that finances are the first thing people consider even during marriage talks, we need to know how to manage them. But before managing financial goals, you should know exactly what they are and how to set them.
What are Financial Goals?
The priorities and objectives you set for spending and saving your income are financial goals. However, everyone has diverse priorities, and they aren't one-size-fits-all. However, if you don't set financial goals, you'll likely wonder where your money went.
This might not seem like such a problem in the early stages, but when you continue to ignore setting financial goals, you will find yourself in a position of confusion where you won't be able to make sense of where you spent it all!
Types of Financial Goals
There are typically three variants of financial goals:
- Short term financial goals
- Mid-term financial goals, and
- Long term financial goals
Now let us understand what these mean, along with a few examples.
These goals are set to be achieved in a short period. It can be a week, a month, or even a year. You can save up to as much as you desire and spend it on whatever you have been wanting. It can be something small or can be something huge. It doesn't matter because ultimately, you are setting the financial goals and you will benefit from it. For example, you can save money for six months for a solo trip abroad. Or you can save for a week and take your partner on a fancy date.
The average time it takes to attain midterm targets is about five years. Good things take a little time and investment, and this is the perfect way to sum that quote up! They are a little more expensive than a daily target, but they are attainable with dedication and hard effort. For example, you are paying off a credit card amount, paying off a loan, and saving for a down payment on a car.
Financial success isn't a result of chance. It's something you build for yourself by making the correct choices and setting long-term financial goals to guide you. It's critical to have long-term financial goals to help you manage your money. Long-term financial goals are those you set for yourself, usually more than five years. On the other hand, short-term goals are by definition shorter in time and have smaller accomplishments.
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For example, Suppose your short-term goal was to build an emergency fund and put $1,000 into it. Therefore, the long-term goal would be to accumulate enough cash in a contingency fund to cover six months' costs.
Why are Short-Term Financial Goals Important?
Short-term financial goals are important for various reasons, like managing the spending, focusing on our economic intentions, and creating checkpoints for our long-term goals.
1. Keep track of your spending
Making a budget and laying out your financial goals and priorities will make it much easier to keep track of your expenditures. You'll be far more likely to modify your spending patterns to meet your goals if you have clear goals and a plan in mind.
2. Your financial intentions should be goal-oriented
This leads to the following: having financial objectives motivates you to save and budget. Saving money might often feel aimless as if you're holding for no other purpose than to save money, and that's when you're less likely to save.
3. Make a list of checkpoints for your long-term objectives
Passing your shorter-term financial checkpoints will position you to establish and realistically attain your longer-term financial checkpoints, which is one of the essential reasons to make short-term financial goals. Long-term objectives are sometimes difficult to attain unless you are financially stable (and debt-free) enough to save and plan for them. Short-term financial planning is all about achieving financial security.
Why are Long-Term Financial Goals Important?
Long-term financial goals are vital because they help you stay focused on your financial objectives. If we only focused on the day-to-day and week-to-week tasks, and we wouldn't have a good picture of how our attitudes are developing over time.
Having long-term financial objectives helps you stay on track. And it tells you if the financial decisions you make today will help you achieve those goals in a few years. One of the most important money lessons to learn is that we must control our money, or it will control us. Setting goals allows you to gain control.
Why should you Set SMART Financial Goals
There's never been a better moment to set SMART financial goals for yourself than now. Selecting the correct plans can help you gain financial control faster and more efficiently than you imagined. SMART financial objectives will provide you with a long-term strategy and the incentive to see it through.
Specific, Measurable, Achievable, Relevant, and Time-Bound is an acronym meaning SMART. Clear milestones and deadlines are part of SMART goals, and setting SMART goals is a good way to get forward.
Define exactly what you intend to accomplish. It's best if you can be as exact as possible. Working toward a well-defined objective is more motivating since you can track your progress and know when you've accomplished it.
Goals must be measurable for you to know when they have been met. Numbers are a terrific method to quantify something.
Make attainable goals for yourself. Setting a succession of small goals rather than a single large goal helps keep your motivation up because you will be successful regularly. If your objective is too big, you can feel like you're not getting anywhere and give up.
Make a goal for yourself that is meaningful to you and will improve your life. Spend some time considering what goals are important to you. For you, a fantastic aim for someone else may be useless in your situation.
Set a deadline for yourself to achieve your goal. It's easy to put off working on your objective until another day if you don't have a deadline.
Financial goals can make you change your future by affecting your current actions. Like all other expenses, financial goals should be included in your budget. You'll be able to take meaningful actions toward achieving them while still having money left over for other expenses.
Calculate how long it will take you to achieve each objective and how much money you will need to give. Setting objectives and devising a realistic plan to achieve them allows you to track your progress and encourages you to keep going.
Even if you fall short, you may establish some sound financial habits.
Also Read: Why Is Financial Independence Important for Women?