What is a Good Financial Goal
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A good financial goal consists of many factors. You need to consider your dreams for the future, and how much money you're going to need after retirement.
Everyone has their personal goals for what they would like to achieve in their life, which is why it is important to save money to be able to complete them.
These goals may be short-term, or long-term, but either way, it's never too soon to start saving. You can choose whether to pay into an account every month, or every week, and you can choose the amount.
However, it must be worked out correctly, so you end up with your desired amount to fulfil your dreams. Many accounts have a high-interest rate, which means you'll earn even more money on top of your own.
This page will give you some further information and guidance for having and setting financial goals. If you do need any further advice, or have any questions or queries, it is essential to get in touch with a professional.
A financial expert can help you find the best way to start saving and give you tips on how to budget.
What is a Financial Goal?
A financial goal is basically a strategy to save your desired amount of money for specific experiences or dreams you want to accomplish in your lifetime.
This involves finding an affordable amount of money to put away either each day, each week, each month or each year, and thinking about an achievable deadline, and saving as much as you can!
These goals could be short-term, meaning a holiday you would like to go on next year, your wedding day, starting your own business, paying off any debt, such as your student loan or credit card debt, or you want to pay off your mortgage.
You can also have long-term financial goals, which are to save up for the amount of money you'll want to have after you retire.
You may also put any extra money away, such as any change you have leftover from your weekly shop. You must make sure you are still able to afford all your bills and don't get into any bad money habits.
It's all about budgeting correctly and efficiently, managing your money better, cut out unnecessary spending, and putting your financial goals first as a number one priority.
Why is it Important to have a Financial Goal?
Having a financial goal can be beneficial in many different ways, especially for your credit score and future finances. If you start early, you will have the motivation to cut back on unnecessary payments such as eating out too often, spending too much on takeaways, daily shopping sprees and your daily coffees.
The main goal is to ensure you have no regrets after retirement, such as holidays you wish you would have saved up for, that dream wedding dress you wanted, set up the business you always wanted to, the house you drove past every day because you wanted it so badly, but also, so you can live comfortably.
Another advantage is you can set up emergency funds, so if you ever have problems with your finance, you are able to dip into your savings account. This can take away the stress and worry of your financial situation and will ensure you always have a backup.
Without financial goals, you can spend as much money as you want, whenever you want. You might even splash your income as soon as you receive your paycheck, which may increase the risk of debt in the future.
How do you Set a Financial Goal?
Setting a financial goal involves a lot of planning and organising. It is a good idea to start by making a list of everything you aspire to accomplish in your life.
This could be a trip you've always wanted to go on or an experience you've always wanted to try out. Once you have done this, you should find rough estimates of how much each goal will cost.
You must then use any income you are receiving to work out an affordable amount to put away each day, week, month or year. By doing this, you will be able to work out when you will have the amount you wanted. You will then need to plan a budget for shopping, eating out, pampering and personal luxuries to ensure you can save enough!
It is essential to seek an expert financial advisor to help you set these goals, as they can help you with all the steps, and have the knowledge and experience required to advise you and point you in the right direction. They can also help you choose the best savings accounts, with high-interest rates to give you that extra push!
What are Good Short-Term Financial Goals?
Short-term financial goals are goals that are set to be achieved in a shorter period of time, or payments that need to be cashed out immediately, or something that's happening in a few months or years time.
There is also the chance of an emergency investment that you didn't know you'd have to make.
You must priorities the goals from the most important to the least important. These are personal goals to you, so one person's most important goal doesn't necessarily mean it would be your most important goal.
Examples of short-term financial goals:
- Emergency fund
- Repairs on your house
- New kitchen or bathroom
- New car
- Buying a new house
- Paying off debt (credit card or student loan)
The Key to a Good Short-term Financial Goal
Here are three factors you need to consider when setting your short-term financial goal:
- Affordable: The goals you set must be affordable and not end up leaving you in debt, instead of with more money.
- Achievable: You must have an attainable deadline for your goal to ensure it is possible to reach your target.
- Aspiring: The goal must be something you really want, to give you the motivation you need to save.
What are Good Long-Term Financial Goals?
Long-term financial goals are extremely important for your future. These goals should be set with the help of a professional financial advisor, as they will determine your financial situation after retirement.
You must take into account bills, food shopping, and some personal luxuries when finding an amount to save each week or month. Remember, your retirement fund is one of the most important out of all your financial goals, as they will also include medical bills if you ever encounter any health problems.
Examples of long-term financial goals:
- Future education for your child
- Retirement (holidays and funds for after you retire)
- Setting up a business
- Mortgage pay off
The Key to a Good Long-term Financial Goal
Here are three factors you need to consider when setting your long-term financial goal:
- Financial Planning: You need to ensure you will be able to save your chosen amount of money for a long period of time.
- Future financial situation: You must decide what you want your financial situation to be like when you retire.
- Hopes and Dreams: Think about everything you've ever wanted to do and ensure you'll have enough money to do them.
What is a SMART Financial Goal?
A SMART financial goal is an acronym for tips on what the goal should be and include. It is essential to take these steps to ensure you have thought about all aspects.
S - Specific
When you set a goal, the amount of money must be a specific number to ensure you are saving up correctly, and won't end up disappointed. If you round down, you will end up with less money than you need, and if you round up, it could take longer to save.
M - Measurable
Financial goals must be measurable, in order for you to track your progress, to reach your target. For example, you are able to check your balance at regular intervals to ensure you are on track to achieve success at the required time.
A - Achievable
For a financial goal to be achievable, it must be something you truly desire to ensure you will be motivated to keep saving! It is vital that when you're setting out your financial goals, that you plan for any financial eventuality and have an emergency fund to make sure you're not going to end up in debt.
R - Realistic
When you are setting financial goals for yourself, the amount you want to save each day, week, month or year, must be realistic, allowing you to set aside the money required for your other expenses. You must balance your financial goals with being able to enjoy life!
T - Timely
When you are setting financial goals, everybody has different time periods to achieve their financial dreams. Some people may set long-term financial goals over 10 years, whereas others may prefer more of a short-term plan.
What is a Bad Financial Goal?
A bad financial goal is a goal that is completely unachievable and may lead to the saver feeling demotivated. When you earn your salary each week or each month, it is important to be able to purchase items that will improve your quality of living, and aid your enjoyment of life.
It is also important to calculate how much your personal outgoings are each day, week, or month as well as keeping aside an emergency fund in case repairs are required in your home or on your vehicle. Plus, you must factor in a budget of spending money to include holidays, Christmas treats and entertainment.
After you've built in these extra expenses, you can realistically calculate how much you have to invest in your long-term financial plan. By doing this, you can save for your future whilst enjoying life in the present.
The Outcome of a Bad Financial Goal
When you set bad financial goals, they can have an extremely negative effect on the investor. Not only will they become completely demotivated, as they have no spare capital to enjoy life, but also, it could lead to debt issues.
These debt issues would happen if the investor ties their money into long-term saving schemes, or investment plans, which means they're unable to get access to their money, even in an emergency.
It's always better to invest the amount you can afford, and no more, as otherwise you will over-stretch yourself, and will be unable to achieve your financial goals.
Also, when looking at investments, you must consider if you are able to withdraw some of your money in an emergency. This may lead to lower financial returns; however, it will safeguard you if any emergencies do arise in the future.
Here at Paul Dodd Asset Management Limited, we are professional financial advisors and wealth management consultants, who can help you with any of your financial goal needs.
We are authorised and regulated by the Financial Conduct Authority, and we have over 30 years of experience in the financial industry, in which we have gained invaluable knowledge.
The content in this article blog goes into a lot of detail regarding what financial goals are and how you set them. However, it is vital to get the insight of a professional to reassure you that you are heading in the right direction and give you further advice to better them.
It is also important because these goals do determine your finance in the future, so get on track as early as possible!
If you would like to find out more information or see a full list of the services we offer, please visit our website, or contact us via phone call, email, or by filling out our contact form.
A member of our friendly team will always be happy to answer any of your questions and give you expert advice.