How to Set Financial Goals
Team Lendermarket

How to Set Financial Goals – Your Ultimate Guide

Everyone has ambitions they’d like to reach. Whether that’s paying for your child’s tuition or saving up for that dream holiday, we all have dreams and aspirations that require significant savings to accomplish.

One of the best ways to meet these ambitions is to set financial goals. Having specific and realistic financial goals can make the difference between realising your dream and falling short. So, this article will cover why financial goals are so important and provide some key steps you should follow when setting them.

Why Are Financial Goals So Important?

First thing’s first – what are financial goals, and why is it important to set them? The simplest way of defining financial goals is as targets you’d like to meet that relate to savings, budgets, or investments. These goals can be either short term, medium term, or long term, but should all have a desired financial target in mind.

A common financial goal is for people to save up enough to make a deposit for their first home. Typically, first-time homeowners will scrimp and save for months or years to meet the required down payment that will allow them to receive a mortgage. Other financial goals include putting enough money aside for a summer holiday or saving an appropriate amount for your retirement.

Regardless of what the financial goal is, the important thing is actually to set one. If you live from paycheck to paycheck, it’s likely that you don’t have a solid financial goal in mind and are therefore not optimising your situation over the long term.

Another reason to set financial goals is that they help to insulate you against recessions and other economic shocks. Invariably, financial goals help people better understand their monetary situation, which can ensure that downturns are not as brutal as they would be without these goals.

3 Key Steps to Set Financial Goals

So, now that you have an idea of what financial goals are and why they’re important, you might be wondering how to begin creating your own. Luckily, this process doesn’t have to be complicated – in fact, it’s actually pretty simple. By following the three key steps below, you’ll be well on your way to setting appropriate financial goals and gaining control over your future.

1. Make Your Goals Specific

Perhaps the most critical factor when setting financial goals is to make sure your goals are specific. This means steering clear of arbitrary goals such as ‘saving more money’ or ‘spending less each month’. Optimal financial plans should be both specific and measurable.

Sit down and have a think about what you’d like to accomplish over the short, medium, and long term. Once you have a list of targets, divide them into which ones are realistic and which may be best left for the future. Then, once you have a list of realistic goals for various timeframes, you can then figure out how each of them could be measured to track progress.

To provide an example of this, imagine you’d like to pay off your student loan. If you were in €20,000 of debt, it’s easy to measure your progress in paying this off. This goal would be perfect, as it is both specific and measurable.

2. Be Realistic

Another essential thing to remember when setting financial goals is to be realistic. There’s no point in setting a target to have €100,000 in savings when you are spending every bit of your income each month. Having an unrealistic target such as this is a sure-fire way to lose enthusiasm and fall off track going forward.

An excellent way to create realistic goals is to evaluate your monthly incomings and outgoings. Once you have done this, you can then note down areas that you can free up some money – perhaps you spend too much each month on takeaways or spend a significant amount on clothes shopping!

After you have analysed your finances and established some areas that you could work on, you’ll have a better idea of which targets are realistic and which aren’t. It’s also a good idea to set yourself a realistic budget to stick to each month – this is a great way to ensure you have accountability and make progress towards your goals.

3. Be Prepared to Make Adjustments

Finally, once you have figured out some specific, measurable, and realistic goals, you can begin working towards these daily. If your financial goal is to save €200 every month, then having this in mind every day can ensure you make appropriate financial decisions and stick to the task at hand.

However, if things don’t seem to be panning out how you’d like, don’t worry! Sorting out your finances and setting reasonable goals is rarely a smooth process – there will always be bumps in the road. It’s important to recognise this fact beforehand so that you can pivot if things get tricky.

So, don’t worry if you have to change your goal from saving €200 every month to saving €150 because your income isn’t at the level you expected – that’s okay! The important part is that you are progressing towards a better financial situation, so don’t give up home. If things change in the future, you can always tweak your goal again and continue improving as you go.

Setting Financial Goals

Setting Financial Goals – Final Thoughts

As you can see from this article, having concrete and attainable financial goals can make all the difference to your personal ambitions. These goals don’t have to be super fancy or lavish – they can be realistic and straightforward.

Using the three key steps presented above, you’ll have all the tools you need to begin creating financial goals today. So, grab a pen and paper (and a strong coffee) and start putting a plan in place – your future self will thank you for it!

 

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