When it comes to your finances, goals are imperative to keeping you motivated. Without goals, you are likely just saving to save. Without goals, you probably aren’t saving enough. And without goals, you probably aren’t planning effectively.
When you set financial goals, you take responsibility for your future and what you want it to look like. For some people, setting these goals can be a daunting task. They don’t know where to start or what to save for. Here are some goals that you should set and some tips on how to set them.
Substantial emergency fund
Having a well-funded emergency fund should be at the top of the list. The cost of repairing your car or replacing your roof will still hurt, but by having that emergency fund there, your day to day finances are untouched.
It also provides some piece of mind. If money gets tight, you are comforted knowing that your emergency fund is there if you need it. The standard recommendation is to have three to six months worth of living expenses saved in your emergency fund.
Get out of debt
Getting out of debt is such an amazing goal to work towards. To be rid of that pesky ache in your side will feel amazing. No more interest payments. Once you pay off your debt, that money can be redirected towards another goal.
The phrase well-funded will have a different meaning to everybody so we will say it’s to your level of comfort. If you have a number that you have meticulously calculated with your personal financial professional, and you have hit it or are far ahead of schedule, that’s awesome! Way to go!
Now that we’ve established some good goals to set, it’s time to figure out how to set those goals.
Differentiate between needs and wants
I should not have to tell you the difference between needs and wants. Needs have to become your priority and wants will sit on the backburner until a goal or two has been met.
Create a budget
Creating a budget is super important for every aspect of your finances, especially your goals. Track spending and cut costs. Then make a deliberate plan to save for your financial goals. Transfer money to savings, money market, and retirement accounts first thing every month.
If you have money left over at the end of the month, I say put it in savings! An alternative is to treat yourself to a job well done. Small rewards can help keep you motivated and focused on your goals.
Increase your savings
If you routinely come out ahead every month, then bump up your savings. If you are saving $50 per month for emergencies, go to $60. If you are saving 15% of every paycheck for retirement, go to 16% or 17%. Every little increase in your savings will add up and get you closer to your goals.
Check in with your budget and your savings to see your progress. This can do two things. First, it will make you aware of changes that need to be made to your budget and your savings. Second, if you stuck to your plan every month, the progress should make you feel good. You will see how far you have come. Nice work!
Setting financial goals for yourself is an incredibly important step in your financial life. Figuring out what you need to save for, budgeting, and checking in every few months are great ways to keep you on track. Good luck on your journey!
So readers, what are some financial goals you have for yourself?