Financial goals are nothing but the financial targets that you set for yourself. In fact, you may have set financial goals all the time without even realising it. These goals can either be short-term, mid-term, or long-term. In any case, it is necessary that they have a fixed time frame.
Secondly, financial goals need not always be earning, saving, or investment goals. As a matter of fact, they can also be about spending as well. For instance, setting yourself a goal where you try to restrict your spending to just 20% of your total earnings is a good example.
To learn more about different financial goals and how you can plan for it, read on.
Since financial goals are usually categorised according to the time that it takes to be achieved, there are three major types - short-term, mid-term, and long-term. Let’s take a look at these three in detail.
Short-term goals
Financial targets with a time frame of less than a year are typically known as short-term financial goals. Saving up for a new television is a good example of a short-term goal since it can usually be achieved within a span of a year, if not a few months.
Mid-term goals
Mid-term financial targets are ones for which you may need more than a year but less than 5 years. Achieving mid-term goals is usually harder than short-term due to the quantum of money involved. However, with a little hard work and discipline, they’re easy to attain.
Long-term goals
Lastly, financial targets with a time frame of more than 5 years are categorised as long-term financial goals. These are the hardest to achieve and require immense financial discipline. Saving up for a child’s higher education is a good example of a long-term goal.
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Now that you know what financial goals are, let’s take a look at how important they can be.
They can help you understand money better
Setting financial goals can change how you look at finance and money as a whole. It can help you understand how investing small sums periodically can add up over time.
They can improve your financial situation
Setting financial goals can also improve your finances significantly. And they make it easier for you to achieve the major milestones in life.
They can influence your actions positively
Setting financial goals will also help you adopt a more disciplined approach to saving and investments over time.
Many individuals tend to think that setting a financial goal is a tedious exercise. However, that’s simply not true. In fact, all that you need to do is follow the tips outlined below.
Know what you need the money for
To set a proper financial goal, you would need to first determine what you’re going to use the money for. Giving your goals a purpose is the first step as it makes them more meaningful and pushes you towards achieving them.
Assign a target date
The next step is to assign a target date. It can be anything from a few months to a few years. Giving your goal a time-frame allows you to plan your finances and take relevant actions. It also makes it easy for you to categorise them into short, mid, or long-term goals.
Set a priority to your goal
If you have multiple goals, which most individuals tend to have, setting a priority for each one can help make managing them easier. Set a high priority for goals that affect your standard of living such as saving up for your retirement or your child’s education. And for goals that are not immediate needs and have no immediate impact have a lower priority.
Now that you know all about financial goals, go ahead and start setting some for yourself if you haven’t already. Setting goals and achieving them one after another can improve your financial health considerably and can improve your overall life in the process.
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FAQs
Good financial goals are those you set using SMART principles. These enhance your financial wellness in the long run. Examples of this include repaying debt, saving for a house/car, creating a tuition fund, etc.
The approach to setting financial goals, in general, is similar for every type of goal. You have to make sure that the goals address your short-, mid-, or long-term needs. You can even use a financial goal planner to envision what you may need.
The top thing you need to remember when it comes to planning your financial goals is to take an assessment of your current financial standing and set your goals accordingly.
Having short-, mid-, and long-term financial goals is important because it improves your financial standing and helps you accomplish your dreams.
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