We all have goals and things we want to achieve in our lifetimes. But wishful thinking alone won’t get you there. Taking control of your finances and making a plan for your money is the best way to match your goals with your bank balance. Financial goals give you a reason to take charge of your money. With the end in mind, you can create a roadmap to achieve your money goals.
In an article by Inc Magazine, the importance of goals is emphasized with the statement, “Goal-setting literally alters the structure of your brain so that you perceive and behave in ways that will cause you to achieve those goals.” In other words, goal-setting is foundational to your success.
That being said, some times creating and prioritizing financial goals can be challenging especially if you are thinking about a lot of things at once. In this article, I'll be breaking some simple but extremely effective examples of financial goals to help you get started. But first, let's discuss what financial goals are.
What are financial goals
Financial goals are objectives or milestones that you want your money to cover at a specific time. Whether it’s building an emergency fund, becoming debt-free, or going on a fabulous vacation, your financial goal needs to be clear. Keep in mind that your financial goals don’t have to be tied to purchases, they can be:
- Living a more minimalist lifestyle
- Earning a certain amount of money through a side hustle
- Becoming a millionaire by the age of 40
- Giving a certain dollar amount to a worthy cause
- Shifting from a scarcity to an abundance mindset
- Earning more money from your job
You however don’t want to confuse a financial goal with a process. A financial goal will tell you what the end result will be but having a good financial plan will ensure you reach your goal. The very first step in getting what you want is to decide what it is that you want. (Get more in-depth details about financial goal-setting here.)
Why financial goals are important
Day to day expenses will demand your attention but it’s important to make your financial goals a priority. Creating a budget and reducing expenses with your goals in mind will make managing your spending easier. Financial goals will remind you of the reasons why you are choosing a particular financial journey. Intentional spending won’t feel like deprivation when you reduce your clothing budget or when you choose to cook dinner at home instead of calling a food delivery service.
Be clear about your goals
Make sure your goals are clear. Clarity will also help you avoid common mistakes when trying to achieve your goal. The more specific your goal is the greater likelihood you’ll be motivated to stick with it. Instead of saying I want to by a car in 3 years, be specific about the color, make, and model of the car you want. Here’s a tip, circa junior high school, create a vision board! You should be excited about your financial goals. When you look at your list of goals or glance over at the vision board you created, it will help keep your focus on your financial goal.
Examples of financial goals by timeframe
Now let's get into some examples of financial goals that you can leverage based on the timeframe in which you want to achieve your goals.
Short term financial goals: 12 to 24 months
Money for short-term financial goals should be easily accessible and is best kept in a savings account. You can decide to contribute to these savings account on a paycheck basis or monthly basis. Any extra money that comes your way like a tax refund, stimulus check, or bonus check can also be earmarked for short-term goals. Specific examples of short term financial goals include:
- Saving for vacations
- Christmas gift savings
- Planning a wedding
- Home Improvement/Renovation
- Building an emergency fund
- Paying off debt
Midterm goals: 2 to 5 years
Certificate of Deposits or CDs, are a great place to keep money that you might not need right away. Interest rates tend to be a bit higher than your traditional savings accounts. Mid-term financial goals might be a goal that will require more planning and a bit more money than short-term goals. These are goals that you might have for later down the road. Examples of mid-term financial goals include:
- Saving for a home downpayment
- Taking your family on a dream vacation
- Paying for a car in cash
Long term goals: 5+ years
Long term financial goals will require planning and determination. It’s easy to become overwhelmed with long-term goals if you don’t clarify why achieving the goal is important to you. Because you’ll be on the journey to achieve a long-term goal for many years, for example, having a well-funded retirement it’s easy to lost focus. By reminding yourself why the financial goal is important to you is key to achieving that goal. Since you won’t need the money right away, consider investing any money you are saving for a long-term financial goal. With low-interest rates on savings accounts, you might consider investing in 529 plans, 401k or Roth IRAs. Examples of long term financial goals include:
- Saving for a child’s college education
- Investing for retirement
- Paying off a mortgage
Key attributes of financial goals
It’s important to know how much you will need to save and for how long. Recognizing your financial goals and creating a savings plan is the first step to achieving your financial dream. Be sure that you set SMART goals. These are goals that are Specific, Measurable, Achievable, Realistic, and Time-based.
Here are some examples of SMART goals:
This means laying out exactly what you want to achieve. E.g. I want to save $30,000 for a downpayment on a house.
Essentially you want to determine a unit of measure on how you will track your progress. E.g. I will need to save $500 a month for the next 60 months in order to have $30,000 in 5 years.
To achieve your goals, you'll need to layout action steps to make your goal attainable. E.g. I can do this by earning more money with overtime at my current job or starting a side hustle. Any bonuses will also go towards my down payment goal.
You'll also need to create goals that are realistic based on factors like your income, time, and what you can do. E.g. I will cancel my cable subscription, gym membership, and eat out less in order to help me save. In one year, I will increase my income by $5,000.
Finally, it's important to assign a specific timeframe by when you want to achieve your goals. E.g. In 5 years, I want to be a homeowner. I will be able to achieve having a 20% downpayment for a $150,000 home in 5 years.
Spend time journaling about what you really want and why you want it. Once you are clear about what you want, you’ll be able to prioritize and set timelines for when you want to achieve them. Setting your financial goals is a great step but make sure you create a plan so you have the cash to back it up. While cutting expenses is a good start, increasing your income can also be a great way to reach your financial goals.
In fact, having a specific income goal is a great financial goal! Be sure to leverage the examples of financial goals laid out in this article. Also, writing your goals down is an incredible reminder when you need affirmations or encouragement along the way.