How to Set Financial Goals
It’s a good idea to set financial goals, no matter where you are in life. Financial goals can help you manage your spending as well as work toward or maintain financial stability. Let’s take a closer look at how to set short-term, mid-term, and long-term financial goals.
What is a financial goal?
A financial goal is a spending or savings target you hope to achieve over a certain period of time. It may be a short-term or long-term objective that is driven by your future financial needs or wants. Your financial goals are unique and may be different from those of your friends or family members.
Why are financial goals important?
Financial goals are important for several reasons. They may allow you to meet your short-term and long-term objectives faster. Your goals can also motivate you to stick to a budget and avoid overspending. In addition, you’ll find that they force you to prioritize how you spend and save your money.
How to use the SMART financial goal strategy
If you set financial goals, be sure to use the SMART strategy. SMART stands for Specific, Measurable, Achievable, Relevant, and Timely. Here’s what each of these attributes means:
- Specific: Your goals are clear and well-defined.
- Measurable: Your goals have specific criteria that allow you to measure their progress.
- Achievable: Your goals are attainable, rather than impossible to achieve.
- Realistic: Your goals are within reach and relevant to your lifestyle.
- Timely: Your goals have a timeline, which includes start dates and target dates.
Types of financial goals
There are three different types of financial goals, including:
Short-term financial goals
Short-term financial goals take less than a year to achieve. These may include buying new furniture, taking a vacation, or paying off a credit card.
Mid-term financial goals
While you can’t achieve mid-term financial goals immediately, they shouldn’t take too long to accomplish. Your mid-term financial goals could be landing a higher-paying job, getting a promotion, or buying a new car.
Long-term financial goals
Long-term financial goals usually take five or more years to achieve and often require more money. Some examples of these types of goals are buying a house, paying for a child’s college education, or retiring.
How to create a plan for your financial goals
To design a plan for your financial goals, be sure to follow these steps.
Write down your goals
Jot down your financial goals instead of keeping them all in your head. Make sure each goal follows the SMART strategy. Place your list somewhere you look often, like your fridge or bathroom mirror.
Track your spending
Keep track of how you spend your money in a spreadsheet or expense tracking app. To start, check your credit card and bank statements. Then, group your expenses into categories like food, transportation, and entertainment. Lastly, figure out where you can cut costs.
Create a monthly budget
A budget is a plan for how you’ll spend your money, based on your income and expenses. The most popular types of budgets you may want to consider include:
- 50/30/20: With the 50/30/20 budget, you can allocate 50% of your after-tax income for your needs, 30% for your wants, and 20% for your savings goals.
- Pay Yourself First: Pay yourself first means that you put money toward your savings before tackling your bills.
- Zero-Sum: The zero-sum budget requires you to choose a “job” for every dollar of your monthly after-tax income.
Monitor your progress
Keep track of how well you stick to your monthly budget and goals. At every check-in, look at your checking and savings accounts to see if you’re on track. If you’re not progressing like you want to, don’t give up. Change your habits and continue to move forward.
Adjust your plan as needed
Your plan is not set in stone. Over time, you may find that your needs and priorities change. If this happens, adjust your plan as necessary.
Advance America can help you meet your financial goals
Advance America is pleased to offer many loans that can help you cover expenses to meet your immediate financial goals. From payday loans and installment loans to title loans and lines of credit, you’ll find several financial products that are easy to apply for and don't require good credit. If you get approved for an Advance America loan, you may be able to receive the funds in your bank account the same day you apply.