Each new year often revitalizes our energy to either start or be better at something.
As such, it’s often the best time to review our finances and see where we can improve.
So, why not set financial goals at the beginning of each year? Doing so helps you stay focused and motivated. It also keeps track of your progress on your way to financial security.
Do you already have an idea of what it takes to get there? If not, here is a list of financial goals to get you started.
What Are Short-Term Financial Goals?
First off, there are two types of financial goals: short-term and long-term.
Although often overlooked, don’t ignore your short-term goals. These are your objectives that can be achieved within two years in the future.
However, how do you know which goals are for the short term?
Again, evaluate which areas in your life bring you the most stress and comfort. For example, if you have a growing debt that gives you anxiety, then it is best to work toward that first. And if having an emergency fund gives you peace of mind, then you better start working on building it.
It is a good confidence booster once you have accomplished smaller goals you have set for yourself. In a way, it proves that you can do anything you set your mind to.
To illustrate, here is a list of financial goals you can complete in a short time.
Clear Your Debts
As previously mentioned, paying off debt is one of the most common short-term goals. After all, it racks up interest. Thus, the sooner you pay it off, the better.
Further, once you are free of debt, you can now start focusing on your long-term financial goals.
While a long list of liabilities is overwhelming, there are methods to keep these in check.
One is the debt avalanche method. In this approach, you pay off the minimum amount for all your debts each month. If you have extra cash, you expend it on the debt with the highest interest rate.
Another strategy is called the debt snowball method. Again, you still pay the minimum amount possible every month. Except, the extra cash now goes into your smallest debt.
Create Your Budget
Next is creating (or sometimes, fixing) your budget.
However, let it be known that there is no perfect approach to budgeting.
It is a constant process of improvement until you find a formula that benefits you.
To start, you can write down your expenses for each day and how much these add up in a month. Afterward, assess where you struggle following your budget. Perhaps, you can adjust and cut back on things that you don’t truly need.
On top of that, you need to be aware of where you spend your money.
Of course, when you create your budget every month, don’t forget to include the debts you are paying off and other goals. This way, you can better see your progress.
Lastly, it wouldn’t hurt to make room for some “fun” funds in your budget. After all, life shouldn’t be just about working. You should also enjoy the money you earn.
Take time to relax and spend time with your family—just don’t forget to budget for the expenses that could come with it.
Build Your Emergency Fund
Setting aside money for tough times is a smart move.
After all, you can never predict life. You might have—heaven forbid—an unexpected expense, medical emergency, or a loss of income.
Having an emergency fund will help you avoid resorting to a far more expensive and drastic solution, such as taking out a personal loan.
As such, most experts say to save up funds that will cover at least three to six months’ worth of your expenses.
What Are Long-Term Financial Goals?
As the name suggests, long-term financial goals take a long while to achieve (often more than five years).
These are significant financial achievements that require a lot of money.
Still, long-term objectives are not only for employees with a family.
If you are a single remote worker, you might want to start thinking about your long-term plans too. It is never too early to start.
Pay Off Your Mortgage or Car Loan
Most of the time, you would want to own a house or car. Except, these properties are costly.
Thus, you need to prepare before making such investments.
One tip is to save up a substantial amount of money so you can afford a reasonable loan.
Also, remember that owning your own home means allocating a budget for repairs, maintenance, or renovations.
Save for Your Children’s Education
If you are a parent, then you would know that providing a child with a good education is not a walk in the park.
It takes a lot of hard work and sacrifice. Unfortunately, a quality education often comes with an expensive price tag.
Thus, think of the school where you plan to send your child. Once done, take a look at your options.
One, you can slowly build up your child’s college education by putting away money in a bank. Or you can also buy an educational plan, which sometimes doubles as life insurance.
Acquiring an educational plan for your child at a young age means the premiums are more affordable.
This type of investment is often better because it can also cover future costs (considering inflation) whereas money stored in a bank usually depreciates.
Prepare for Retirement
Lastly, do not forget about yourself.
You won’t always be healthy and fit. We are humans after all, and our bodies have limitations.
The idea of turning sixty may seem far for now. However, for most of us, that is in as little as twenty to thirty or so years.
As such, aim for a comfortable retirement.
Find other possible sources of income to augment your earnings and then look into where you can invest to grow your money. If your company also sponsors a retirement plan, you might want to sign up.
By age sixty, you will be reaping the benefits.
Take the First Step.
As the new year starts, you have another 365 days or 52 weeks to set your personal financial goals.
But even so, the most important step is to just start. Bust out your planner (or any notebook) and start making plans.
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