Taking charge of your financial future involves setting short-term, mid-term, and long-term financial goals.
In fact, did you know that 83% of people who set financial goals feel better about their financial situation within just 12 months after setting their goals?
Setting financial goals can also help you improve your current financial situation.
In this article, I am going to show you how to set financial goals by giving you my top 10 financial goals examples that can help you take control of your finances.
What is a Financial Goal?
A financial goal is a milestone you aim to reach by mastering money management. Financial goals can be either short-term, mid-term, or long-term and they typically require you to budget, save more, pay off debt, and invest for retirement.
The more specific and measurable your financial goals, the more likely you will accomplish them.
The unfortunate truth is that today more than ever; Americans need to commit to their personal finance goals so they can better prepare for their future.
The recent pandemic has been a complete disrupter, financially speaking, for most Americans. In fact, 63% of Americans say their personal finances were affected by COVID-19.
Solid financial goals can help you get back on track.
The first step to developing your financial goals is to create a budget with top-tier software programs like You Need A Budget.
Once you’ve created a budget, the next step is to figure out your financial goals.
Below is a list of financial goals that my wife and I developed for ourselves:
- Live on a minimalist budget
- Pay off the mortgage by 35
- Retire our parents by age 35
- Achieve millionaire status by 35
- Travel to 1 new country each year
- Build 2 additional side hustles by 30
While we have many additional goals, these are some starter financial goals that you can also take inspiration from.
The 3 Types of Financial Goals
There are 3 types of financial goals:
- Short-term
- Mid-term
- Long-term
It’s important to understand the difference between each of the three types so that you can start setting short-term, mid-term, and long-term financial goals.
Below is a breakdown of the 3 types of financial goals:
| Financial Goal | Time Frame |
|---|---|
| Short-Term | 12 months |
| Mid-Term | 1 year to 5 years |
| Long-Term | 5 years+ |
Here are some short-term financial goals examples:
- Start a budget
- Save for holiday gifts
- Prepare an estate plan
- Build an emergency fund
- Build a net worth statement
Short-term goals should be accomplished within 1 year of setting them. Typically, short-term goals are fairly straightforward.
Now let’s take a look at some mid-term financial goals examples:
- Pay off your car
- Save for a house down payment
- Pay off your massive bank loan.
Mid-term goals often take a little more time to plan and execute. They also typically require more money than short-term financial goals.
Lastly, let’s take a look at some of the long-term financial goals examples:
- Save for college
- Save for retirement
- Build your business
- Pay off your mortgage
- Plan for long-term care
Long-term financial goals often require more planning, more money, and more commitment. Often, long-term goals take patience and discipline – and typically it takes time to see progress.
Long-term financial goals are critical to accomplish financial freedom. One of the most popular financial goals is to save enough money for retirement. While most recommend saving around 10% of your total income, considering today’s increasing cost of living, the exorbitant cost of healthcare, and the fact that we’re living longer, it’s a better idea to save 30% at minimum of your total income for a better retirement.
It’s critical to have long-term financial goals because these goals help you accomplish lifelong dreams – like retirement, owning a home, or providing for your family’s financial security.
Financial Goals: What to Keep in Mind
As you start considering which financial goals may best suit you and your situation, you should keep in mind that there is a secret way to build successful financial goals.
I call it the SMARTV Plan.
| The SMARTV Plan | |
|---|---|
| Specific | Your goals should be specific |
| Measurable | Your progress should be tracked |
| Actionable | You should be able to take easy action |
| Realistic | Don’t exaggerate your goals |
| Timebound | Set specific time frames |
| Visible | Your goals should be visible for you on a daily basis |
If you follow the steps of the SMARTV plan, then you’ll make it much harder for yourself to fail at accomplishing your goals.
I’ve personally used the SMARTV plan when it came to building this blog, and it worked wonders.
Financial Goals Examples
As you read through these goals, remember to stay:
Now that you have a rough idea of how to set financial goals, let’s take a look at the top 10 financial goals examples.
- Patient
- Focused
- Consistent
Even if you don’t see progress within the first few months, continue with your plan, and chances are, you’ll start seeing a difference down the road.
Let’s dive right in.
1. Educate Yourself on Basic Financial Literacy
If you want to get ahead financially, you have to understand basic money matters.
Clearly, there is a lot of ground that we need to cover.
If you want to save money in the future, then one of your financial goals should be to start educating yourself on basic financial literacy.
Do yourself the favor and start saving money now.
If you build up your financial literacy, then you’ll be ahead of most Millennials, because only 16% of millennials are financially literate.
I believe that every student should sit through a personal finance class.
If you want to improve your financial literacy, I would recommend you first to sign up to my weekly newsletter, below.
Second, I would suggest picking up a book (or listen to a podcast) that talks about some of the basic personal finance concepts.
Below are my top personal finance book picks:
- The Behavior Gap by Carl Richards
- How to Get Rich from Nothing by Me
- The Millionaire Mind by Dr. Thomas J. Stanley
- The Richest Man in Babylon by George S. Clason
The most important part is to start educating yourself – even if it’s just for 15 minutes a day.
2. Pay Yourself First
Paying yourself first is critical to long-term financial success.
Paying yourself first really means using your paycheck money to:
- Pay off credit card debt
- Invest in your retirement plan
- Add to your emergency savings fund
- Increase your investment contributions
As it stands currently, 95% of millennials are saving less than the recommended amount for retirement (which typically is between 10% to 20% of your total income).
The good news is that paying yourself first is a way to combat this statistic.
Here how:
- Spend less than you earn
- Set up auto-recurring investments
- Don’t allow your lifestyle to eat into your long-term goals
The most important point is to start paying yourself first now.
3. Build Additional Income Streams
Have you ever heard of the saying: Never put your eggs in 1 basket?
The same goes for your income streams.
Especially with the COVID-19 pandemic, we’ve been taught that we can no longer rely on just 1 income stream (which for many would have been their primary job).
Instead, it’s imperative to start building passive income streams.
Here are some of the top passive income ideas:
| Passive Income Idea | Best Resource |
|---|---|
| Invest in Blue-Chip Art | Masterworks |
| Real Estate Crowdfunding | Fundrise |
| Investing in the Stock Market | M1 Finance |
| Crypto Interest Account | BlockFi |
| P2P Lending | Groundfloor |
Another great way to build additional income streams is by starting a side hustle.
Here are some of the top side hustle ideas:
| Side Hustle Idea | Best Resource |
|---|---|
| Freelance Writing | Writing to Riches |
| Affiliate Marketing | Twitter Affiliate Mastery |
| Content Creator | Create 24/7 |
| Online Surveys | ySense |
If you want to become financially independent and create new income streams, then check out these platforms to grow your long-term wealth.
Recommended Reading: 7 Multiple Streams of Income
4. Develop & Stick to a Budget
Have you ever tried driving a long road trip without a map (or without your GPS)?
If you don’t stick to a map, then there is a high chance that you’ll get lost and probably end up somewhere completely different from your final destination.
The same goes for not having a budget.
Your budget is your road map.
Budgets are critical to helping you:
- Plan
- Execute
- Accomplish
…Your financial goals.
And the good news is that 58% of Americans feel comfortable creating a personal budget – but most just haven’t started one yet.
And that’s ok because one of the keys to setting financial goals is to first understand your current situation: Your income and your expenses.
That’s where a budget comes into play.
5. Pay Off All Credit Card Debt
There are some savvy ways to pay off credit card debt, however.
One of those ways is called credit card debt consolidation.
Debt Consolidation Defined:Debt consolidation is where you roll all of your debts into 1 bucket, have a third party pay off your high-interest debt for you, and in exchange, you start paying regular monthly payments toward this third party (typically with lower interest rates and more favorable terms).
The reason why debt consolidation could work is that:
- You pay a lower interest rate
- You only have 1 monthly payment to 1 company
- There is a clear end date to when your payments terminate
Pro Tip: Keep in mind that debt consolidation is just a temporary fix – it will help you get rid of your high-interest credit card debt. However, debt consolidation will not fix any underlying spending problems (for example). If that’s the case, make sure you find outside help.
6. Build an Emergency Savings Fund
If you had to drive exactly 137 miles, would you fill up your car tank to give you a range of exactly 137 miles?
The answer should be no.
You don’t know if there will be a detour, which could cause you to drive a different route, and you also don’t know whether you’ll get lost and drive more than the 137 miles.
We just don’t know what the future will hold.
And that’s why it’s critical to have an emergency savings fund – a cash account that can get you through an emergency like an unexpected detour.
If there ever was an emergency, chances are they will have to resort to debt financing (aka using their credit cards) or taking on other high-interest loans.
Here’s how much you should have saved in an emergency fund:
- 3 to 6 months’ worth of your living expenses
So if you earn $3,000 a month, you should have saved between $9,000 to $18,000 in cash in an emergency savings fund.
Why?
COVID taught us a valuable lesson: Your job is temporary.
Your emergency savings fund can keep you afloat during the months that you are looking to find a job (for example). On average, finding a job typically takes 6+ weeks.
That’s where you’ll have to rely on an emergency fund the most.
7. Establish a Solid Credit Score
Think about your long-term goals.
If you want to:
- Buy a car
- Buy a home
- Get a new job
…Then you’ll probably have to show you are responsible.
Most institutions take your credit score, which for them is a measure of responsibility (aka whether you pay your bills on time).
That’s just the way things are.
Your goal should be to land anywhere between the Good and the Excellent ranges.
Your credit score is determined by several factors including:
- Your credit mix
- Your new credit
- How much you owe
- Your payment history
- The length of your credit history
8. Save for Retirement
Although retirement may seem so far off, it’s never too late to think about your road map to become financially free during retirement.
If you want to get ahead of the curve, start saving for retirement today.
In fact, 66% of millennials have $0 saved for retirement.
Even worse, most people\’s retirement plan is to just keep working during retirement – which often leads to stress, increased health issues, and potential frustration.
Unless you love your job, don’t count on working the last few years of your life because you have no other option.
Save yourself the trouble by putting your money to work today.
Here’s how:
- Spend less than you earn
- Max out your retirement plans
- Invest consistently every month
First, it’s critical to at least contribute enough money to your 401k plan (if you have access to one) so that you receive your employer matching contribution.
Second, you can open a tax-advantaged retirement account (like an IRA or a Roth IRA) through free investment apps like M1 Finance.
Even if you can invest “just” $100 every week, then do it.
Start now. You’ll thank yourself later.
9. Get Life Insurance
Even if you’re in your early 20’s, life insurance is something that you’ll probably want to consider at some point in your life – and the earlier, the better.
Why?
Because the cost of your life insurance could be substantially lower if you’re younger (because you’re healthier) versus if you applied for life insurance at a later age.
In fact, only 10% of Millennials have enough life insurance to cover 100 percent of their needs.
Here’s when you need life insurance:
- You have kids
- You have a partner
- You have other dependents
- You are the primary breadwinner
And honestly, even if you are single and without kids as a millennial, you should probably consider buying life insurance earlier than later – especially if you plan to start a family in the future.
Recommended Reading: How Much Life Insurance Do I Need?
I should note that there are many different types of life insurance.
When I’m talking about life insurance for Millennials, I’m actually talking about buying what is known as term life insurance.
Term Life Insurance Defined:Term life insurance is the simplest, cheapest, and typically the best life insurance for millennials. You pay a set premium for a fixed term (typically 20 to 30 years). If you outlive your term life insurance, you don’t get any benefit.
Conversely, if you don’t outlive your life insurance term (which we hope won’t be the case), then your designated beneficiaries (aka the people who you want to receive your life insurance money) would receive your life insurance death benefit tax-free.
I work with a lot of millennials, and I often suggest they consider purchasing a term life insurance death benefit between $500,000 to $1 million.
Typically, they would be looking at a $20 to $50 monthly cost for that type of coverage (which is pretty cost-efficient).
Although no one likes talking about their mortality, it’s important to prepare yourself – and your loved ones – for a worst-case scenario.
Term life insurance often is a cost-efficient way.
Financial Goals: The Bottom Line
Especially in today’s chaotic, pandemic-ridden world, it’s more important than ever to understand your financial goals and what you need to do to make them a reality.
Remember that your personal finance goals should be:
- Specific
- Measurable
- Attainable
- Relevant
- Time-based
…Aka your financial goals should be SMART.
Life is guaranteed to throw several unexpected curve balls your way – and you better be prepared for those situations (financially speaking).
Keep in mind that:
- People are living longer
- Wages are fairly stagnant
- The cost of living is increasing
- Student loan debt is increasing
- The cost of healthcare is increasing
…And all of this means that your financial picture better be prepared for whatever comes your way.
If you don’t know where to start, my advice is to start with a budget. Remember that you can download one of the best budgeting tools, You Need A Budget (aka YNAB), with a free 34-day trial.
A good personal finance goal will include the characteristics of the SMART acronym: Specific, Measurable, Attainable, Relevant, Time-based. The key to a good financial goal is that you create a clear roadmap to accomplish your goal.
Setting financial goals works when you set short-term financial goals, mid-term financial goals, and long-term financial goals. The more you break down your personal finance goals into categories, the easier it will be to accomplish them.
Adapted from https://themillennialmoneywoman.com/financial-goals/
great content, thanks for sharing