Everyone wants to have more money, less debt, and greater financial freedom, but very few will attain it. Simply telling yourself that you’ll earn more cash and clear more debts isn’t enough to realize those goals, but writing those tasks down, setting realistic targets, and steadily working towards them can significantly increase your chances.
Nothing is guaranteed, but someone with clearly defined financial goals has more chances of attaining financial freedom than someone without.
Types of Personal Financial Goals
Financial goals come in many forms, but they all revolve around money and acquiring as much of it as possible. Some of the most common short and long-term goals include:
Establish a Budget
The first step to fixing your finances is to create a budget. It’s a short-term goal and it’s also one of the simplest, but that doesn’t make it any less important. Many Americans underestimate how much they spend and overestimate how much they earn, making a budget essential for adding a little clarity.
Clear Credit Card Debt
Americans have an average of $38,000 worth of debt excluding mortgages. A small percentage of this is allocated to credit card debt, but it often carries the highest interest rate and has the worst terms. Clearing this debt is an honorable and sensible goal for anyone with mounting debts.
Save Money for a Big Purchase
The average American family under the age of 35 has between $2,500 and $4,000 in savings. That’s barely enough to cover a used car, let alone a mortgage down payment or college education, which is what most families are saving towards.
Save for Retirement
This is the ultimate long-term financial goal. Saving for your retirement will give you something to look forward to and make life easier as you enter your old age. Many retired Americans regret not saving more money, with some experts recommending that you have at least $1 million tucked away to cover you for an average of 18 years.
That’s a lot of money, but it comes from a lifetime of saving and means you can enjoy plenty of cruises and vacations when you call time on your career.
Fix your Credit Score
Next to your Social Security Number, your credit score is one of the most important numbers you have and one you need to pay close attention to. Build a good score and a world of opportunities will open for you, making it easier to get low-interest loans and secure high credit limits.
Create an Emergency Fund
You can never underestimate the benefits of an emergency fund. It’s essentially a savings account without an end goal and it’s used to cover you in the event that you’re hit with an unexpected bill or expense. It will also help if you lose your job or become ill.
Improve your Financial Situation
This incorporates many of the goals discussed above, one can be both a short-term financial goal and a long-term one. The most common goal is simply to have more money for an easier life or an early retirement, but there are also those who save so they can move abroad, start a dream business or simply become a millionaire.
These goals are a little harder to achieve than simply clearing debt or have some extra money in your pocket, but they’re not unreasonable. If you have a detailed plan and work hard to realize it, there’s no reason why those lofty long-term financial goals can’t be realized.
Why Should You Set Personal Financial Goals?
Goals give you direction and purpose. They provide a detailed outline of what you need to do, what you have achieved thus far, and what remains. This adds a sense of accountability that simply wouldn’t exist without those goals.
If you simply tell yourself that you’re going to do something, you’re more prone to procrastinating and moving the goalposts whenever it suits you. If you write all your goals down and separate them into clear and manageable chunks, there’s no room for denial or deviation.
Think of it as a visit to the grocery store. If you have a list, you buy what you need, don’t forget anything, and are more inclined to focus on the purchases that are within budget and will actually be eaten and enjoyed. If you visit without a list, you’ll end up with a bunch of unnecessary foods you bought just because they were on offer and will forget all the things you went there to buy.
Our minds need direction, purpose. When the road is long, it’s easier to traverse if there are milestones, checkpoints, and clearly defined borders; without all that, it’s just a chaotic mess and you’ll never make it to the end.
Short vs Long-Term Goals
A short-term goal spans days, weeks or months; a long-term goal stretches things out over several years and even a decade. It’s important to have both, but short-term goals should have priority as long-term ones can get lost and forgotten about.
As an example, let’s suppose that your goal is to save a lot of money for your retirement. A long-term goal would be as simple as:
- Save $500,000 before retirement
This doesn’t really help. However, if you break it down into multiple short-term goals you can focus on each of these in turn, ticking them off as you go and motivating you to keep going. As an example:
Increase Debt-to-Income Ratio
- Cancel unused subscriptions
- Sell unwanted items
- Ask for a pay rise
- Get a part-time job
- Clear credit card 1
- Clear credit card 2
- Repay student loans
- Repay personal loan
- Open a savings account
- Save $500 a month
- Make a sound investment
You can break these debts down even further and focus on making extra cash every single day. If that’s what gets you up in the morning and pushes you towards your long-term goal, that’s what you need to do.
How to Track Your Progress
As the saying goes, there is an app for everything and where financial goals are concerned there are actually multiple tools and apps to help you out:
- Mint: Track activity in real-time after connecting bank accounts and credit cards. Monitor spending, create budgets, and learn how to manage your money. Mint is one of the highest-rated budgeting and financial management apps on the market and is well-deserving of the praise it has received over the years.
- Wally: A great little budgeting tool that can keep track of your savings goals and tell you when certain bills are due. It’s free and if your goal is to save and cover your debts, it does everything you need.
- Every Dollar: A simple but useful app designed to help you escape debt and manage your finances more effectively. It literally lets you see where “every dollar” is being spent.
- Clarity Money: A useful app to help you manage your subscriptions. The average consumer has dozens of subscriptions and it’s easy to lose track, but Clarity Money keeps everything in one place.
- Spendee: Manage family finances with this shared budgeting app. It’s ideal if you’re saving along with a partner or want to keep track of what everyone in your household is spending.
How to Meet Your Financial Goals
Whatever’s on your to-do list, just set a goal and start working towards it. Take a look at these tips to help you:
Debt is crippling and the less you repay, the more damaging it becomes. Credit card debt, student loans, medical debt; it creeps into your life, it grows, and it never seems to go away. Before you focus on your savings and build towards a brighter future, you need to focus on clearing those debts.
Debt relief methods can help you with this, including consolidation, debt management, and debt settlement. In the first instance, however, you should try debt payoff strategies like Debt Snowball and Debt Avalanche, both of which rely on you generating extra money to meet more than your minimum.
Every time you meet the minimum payment on your debt, you’re paying a lot of interest and a little principal. The interest compounds, the debt grows, and if you keep sticking with just the minimum payments it will take forever to repay. When you repay more than the minimum, however, you’ll clear more of the principal, reducing the compounding interest, amount, and term.
It doesn’t matter how substantial your net worth is, how much money you have in the bank and what sort of long-term financial goals you have, it always helps to have an emergency fund.
An emergency fund is a sum of money put aside for a rainy day. Unlike a savings account, which might be used for retirement, a vacation or college tuition, an emergency fund has no predetermined purpose and is designed just to sit, grow, and wait for a rainy day.
An emergency fund can help you if you lose your job or have a medical crisis. We live in times of uncertainty and exist under one of the costliest healthcare systems in the world. A short stay in a hospital can bankrupt you if you’re not insured and even if you are, there are still costs to consider.
Budget to save and invest but keep some money aside to build an emergency fund and make sure you’re prepared.
Successful savings goals are built on careful planning and sacrifices. If you want a new home, you need to say no to luxury purchases, eating out, vacations, and other expenditures.
The average American family wastes about $1,500 a year on uneaten groceries, $3,000 on restaurants and takeout, up to $500 on gambling, and thousands more on vacations, smoking, unused subscriptions, and more.
You don’t need to eliminate these expenditures entirely, just look for cheaper and more sustainable alternatives. Save on wasted groceries and dining out by going for a picnic; swap an expensive vacation abroad for a family fun staycation.
Once you eliminate these expenses, you can start saving towards whatever goal you have, be it a retirement fund, a car or the down payment on a house.
Achieving a Huge Net Worth
It’s okay to scoff at this one as it does seem a little far-fetched. However, it’s a dream that countless Americans have and one that is very attainable. Of course, it’s easier if you have a talent or you’re young enough to develop one, but providing you have a good work ethic, don’t spend your days procrastinating, and have the right mindset, you can build a sizeable net worth.
It’s about making smart financial decisions, acquiring lots of knowledge, adopting careful investment strategies, and working endlessly. Here are some tips to help you accomplish this lofty goal:
Don’t Spend Frivolously
The world of the rich and famous is awash with stories of people who adopt unbelievably frugal lifestyles despite having millions or billions in the bank. There are stories of Warren Buffet going to great lengths to use coupons to buy fast food, even though he’s one of the richest men in the world.
This kind of frugality is a little extreme, but it comes from the right place. Rappers, rock stars and sports stars like to throw money around when they have it, but they’re the ones declaring bankruptcy and being arrested for tax debts when their careers enter a slump. That’s not a sustainable lifestyle for anyone, even the super-rich.
Learn how to manage money properly and accumulate as much as you can. Don’t scoff at the end of saving a few dollars just because you have a few hundred; don’t throw away a few hundred just because you have a few thousand.
Adopting this frugality will hasten your journey to becoming a millionaire. It will also allow you to manage your money effectively when you eventually make it, preventing you from being one of many sob stories of people who came into lots of money and then blew it.
Treat Life Like a Business
To become rich and successful in a way that doesn’t rely on good fortune, you need to treat your life like a business. A business, for instance, is very wary of accumulating expenses and will instead try to invest additional cash into assets. These assets increase the value of the business, whereas expenses reduce it.
As an example, let’s assume that you’re 18 and have a talent for writing. A good investment would be an education in literature or creative writing, a laptop, a writing course, even a home office. An expense, however, would be a holiday, a flashy watch or lots of designer clothes. None of these things will grow your wealth and most will hinder it.
Take a look at our guide on good debt vs bad debt to learn more.
Read, Learn, Fail
Read as many books as you can on your chosen subject and on similar subjects. You’ll learn about the world, the English language, and more. All these will help to improve your reasoning, logic, and knowledge, which will help with your goals.
Learn New Skills
Knowledge doesn’t just come from books and it shouldn’t be limited to specific subjects. If you want to be rich and successful, you need to devote every minute of your spare time to working, learning, and acquiring new skills.
Learn a language, adopt a craft, research into a niche subject—all these things can broaden your horizons and increase your earning potential.
Find a Specialty and Stick with It
While it’s good to read many different subjects and learn many different things, when it comes to actually making money, you need to stick with a single subject. The world is filled with wannabee millionaires who spend their days writing music, books, and screenplays, and their nights trying to juggle freelance careers and businesses.
Specialize in one thing, be the best you can be, and once you have the money and the success you can start venturing into other areas.
Stop Making Excuses
Generally, people who dream of becoming rich and successful will fall into one of two categories. In the first, there are those who spend their days dreaming, partying, and procrastinating. They assume that being rich is simply a case of having a great idea and then waiting for the riches to descend. In the other group, you’ll find people who work every minute of the day and are always willing to take risks and make sacrifices.
If you want to accomplish great things, you need to work for it. Don’t assume that all the rich and successful people you see on social media have it easy. If they’re not working every minute of every day, there’s a good chance they worked that much to get where they are.