How are the New Year resolutions holding up?
Every year, millions of people set goals to “finally” get their life in order. The scope of these goals covers everything from losing weight to gaining money.
In the fiscal realm, your best success lies in specificity. The more detailed you are in your financial goals, the better off you’ll be. Your next steps are more apparent when your goals are defined. How specific do you have to get?
There are short-term financial goals, and then there are long-term financial goals; it’s good to have both of them. What are financial goals? Essentially anything dealing with how you use your money.
We’ll outline some specific examples of financial goals in this article. So, instead of setting a goal, like “make more money,” and leaving it at that, take a look at this list of the six best financial goals to set this year.
AdvisoryHQ’s List of the Top 6 Best Financial Goals to Set This Year
List is sorted alphabetically (click any of the names below to go directly to the detailed review section for that firm/product):
- Budgeting, the Not-So-Sexy Financial Goal
- Debt Destruction
- If You Can’t Save the Future, Save for the Future
- You Cannot Wait, So Automate!
- Buy, Buy, Buy!
- The Ultimate Investment
Budgeting, the Not-So-Sexy Financial Goal Review
Creating a budget is a powerful saving tool and an essential element in setting financial goals. This isn’t the most glamorous financial goal you will set, but it is instrumental in your financial success.
Budgeting does not mean cutting out all of your favorite purchases. It doesn’t mean you can’t go out to dinner with friends because “you’re on a budget.”
It means breaking down exactly where all of your money is going. When it comes to personal financial goals, you need to know where your money is allocated. No budget is like flying a plane through never-ending clouds with no fuel gauge. There’s a reason we’ve put this as the first item on the financial goals list.
- Transportation (gas, auto loan, public transit)
- Credit card debt
- Student loans
Fifteen percent would go to your retirement fund. We will go into greater detail further down the financial goals list. For now, know that this fund would include accounts such as:
- Traditional IRA
- Roth IRA
And 5% would go towards saving for short-term financial goals. The best part about a budget is that it’s a fiscally beneficial step that you can take right now. Look at your credit card statements and your various bills or receipts, and do your best to reconstruct last month’s spending. This roadmap will be invaluable to you.
Debt Destruction Review
Getting rid of any debt you have is a good idea. No one likes being in debt, so the sooner you get out from under it, the better you’ll feel. Whether you have debt on multiple cards or through multiple loans, you should always pay at least the minimum. When it comes to setting financial goals, getting your debt in order is important.
What can you do? There are a few different approaches you can take based on your current financial situation:
- Pay the lowest value loans first
- Pay the highest interest loans first
- Consolidate your loans
- Pay more than the minimum amount
- Cut spending elsewhere and use it on your debt
Image Source: BigStock
There isn’t necessarily a “right” way to do it. Paying the lowest value loans first means freeing up that payment money to contribute to the next lowest loan. Paying the highest interest loan first means less interest paid over time. Consolidating your loans or debt typically leads to lower interest on those loans and a faster payoff.
Your short-term financial goals should include whichever debt reduction method you can best accommodate.
Any dollar amount you can spare to pay over the minimum will help pay down the debt faster. Pay as much as you can. You could also, after creating your budget, find some spending areas you could cut back on. Use that freed-up money to cut down your debt.
If you have massive amounts of debt, it could take more than months to pay it off. Don’t avoid it even if it seems dauntingly large. Even if your amassed debt is one of your long-term financial goals, you should still attack it as aggressively as you can.
If You Can’t Save the Future, Save for the Future Review
“Saving for the future” is the king of vague financial goals. What is a financial goal you could set for the near future? Here are several:
- “Rainy day” funds
If you treat these short-term financial goals like a bill to pay, it might be easier for you to put money towards the fund consistently. Or, if you focus on the positives of what you’re saving for, it could motivate you to part with the money.
Then there’s the distant future to plan for. Here are some common long-term financial goals:
- Big retirement fund
- Kid’s college fund
- Dream house fund
In either case, the best way to save is to start right now. To illustrate this, take a look at this savings calculator by CalcXML. You enter the age when you start saving, the age when you want to stop saving, the amount you want to save, and your estimated tax bracket. Then the calculator calculates how much more expensive it is for you if you wait just five years before you start to save.
In many of these calculated long-term financial goals examples, waiting just five years to start saving for the same retirement amount could add tens of thousands of dollars in additional cost to you. To be clear, the additional cost doesn’t refer to fees you’d owe an institution. Rather, it references money you would have to add to the account in order to catch up to someone who started saving five years earlier.
You Cannot Wait, So Automate! Review
Image Source: Pixabay
Automation is a financial goal you can accomplish with a few hours of diligent work. It will help you not only with your short-term financial goals but with your long-term financial goals as well. Automating your finances means less stress for you. Here are some elements of your finances that you should automate:
- Bill payments
- Mortgage or rent payments
- Savings account deposits
- IRA account deposits
- Long-term investing
What happens when you automate? You put yourself in a much better position to reach your personal financial goals.
If you want to take a vacation in a year, figure out what you want to do and how much it will cost. Then divide that amount by 12 months. Now you know how much you have to put into your account, per month, to have the money for that vacation in one year. What’s the next step? Automate!
Since you know what it will cost per month, you can have your checking account send that amount, once a month, to your “vacation fund” account. Set it and forget it. Think about how much easier automation makes this process.
Since the money is automated, you do not have to rely on your willpower to make the deposit decision every month. You will not be tempted to buy two new pairs of shoes every time you’re at the store. Instead, you’ll realize the money you’d need has already been, or soon will be, transferred into a different account.
If you take the same approach to paying your bills, rent, and credit card balance, you’ll be in great shape to hit your personal financial goals. Most accounts offer an alert feature, which you can set to notify you when you pass below a certain balance. If the option is available, you should take advantage of it. This ensures you’ll always have the money in your account to make your payments, and it will give you peace of mind. The “vacation fund” is a short-term example, but automation works for long-term financial goals examples as well.
Buy, Buy, Buy! Review
Now that you’re convinced of the need to start saving, what’s a good way to get there? Time to introduce stocks into your long-term financial goals. Investing in stocks can be an intimidating venture. Setting financial goals is all about growth, specifically of your wealth. It also requires some changes on your part, so you can’t be intimidated by the stock market. There’s a wealth of information out there to help get you started.
Stocks offer the best potential for growth. When your savings plan is spread out over a longer period of time, you can be more aggressive with your initial investments. Assembling riskier portfolios (U.S. stock-dominant) could lead to bigger earnings. You could also go with a tamer stock portfolio, investing more heavily in bonds and less heavily in U.S. stock.
The stock market can be notoriously volatile. Being able to stay focused on the big picture as the market falls and rises will help you hit your long-term financial goals. Even after big recessions, the economy bounces back. Bankrate talks about dollar-cost averaging, which is a good way for a beginner to ease into the market.
The Ultimate Investment Review
We’ve talked about several financial goals and the value of specificity. We talked about short-term financial goals like tracking and building a budget. We discussed long-term financial goals like planning for retirement. What could the ultimate investment possibly be?
That’s right, investing in yourself is an ultimate investment. There are a number of ways to do this:
- Learn even more about finances
- Take classes
- Learn new skills
- Set personal financial goals
- Automate your finances
- Relax with friends and family
Some of those items relate to financial goals. Some require money. Others require time. Hitting every single one of your financial goals won’t do much for you if you aren’t able to invest any of your time in other facets of life that matter to you.
You can invest in yourself by taking new classes and learning new skills that will make you even more valuable to your employer. Why do that? Because you could earn more. Demonstrate more value to your company, and you’ll be worth more to them (i.e., a potential raise). New learning can help you feel accomplished, successful, and could lead to more wealth.
There’s a wide array of online classes, with more being added frequently. You don’t need to attend an online university; you can try one-off courses on websites like lynda.com and udemy.com. These online courses are a great way to boost specific skills without breaking the bank.
Conclusion – Top 6 Best Financial Goals to Set This Year
Financial goals can seem daunting. The distance of long-term financial goals, like retirement saving, makes it easy to say, “I’ll start next year.” The proximity of short-term financial goals, like a vacation next year, makes it easy to say, “I don’t make enough to save for this yet.” But you shouldn’t wait. And you don’t have to!
Start with your budgeting, sniff out any money leaks, and plug them up. Then move on to a debt-destroying plan. Map out your big plans for the future, and start breaking down costs. Suddenly, you’ll realize that even $30 dollars a month, if you start right now, can really add up. Set up an IRA or contribute more to your 401(k). Automate your finances.
One by one, the money worries that have bogged you down will start to lift, and you will feel like a new person. Harness that bravery and look into the stock market. Take a course on it, read about it, and ask your stock-savvy friends for tips on getting started. Invest in the market. Then keep investing in yourself. Your financial goals are within your reach.
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