What is a financial goal?
A financial goal is an objective or aim you have that’s related to managing your money. Your plan can involve earning, saving, spending, or investing money.
Having clear financial goals can help you quickly manage and maintain your budget. This is because working towards that vision is easier when you have a clear picture of what you want to achieve.
Financial goals can also help you prepare for the future and protect yourself against financial crises. As the pandemic taught us, families and businesses must save money to be ready for such challenging circumstances.
There are also different goals: short-term, midterm, and long-term. By setting other goals, you’ll be able to achieve various financial goals like paying off short-term bills, managing your retirement fund, and getting rid of credit card debts.
Setting financial goals also means reviewing your objectives, updating them, and viewing your progress from the previous month or year.
This post will cover everything you need to know about financial goals.
3 Types of Financial Goals
Here are 3 types of financial goals you can set:
- Short-term goals
Setting short-term financial goals can help you achieve larger, long-term goals. Your short-term goals should be easier to achieve. Some short-term financial goals include creating a budget, an emergency fund (money you set aside specifically to pay for unexpected expenses), and paying off credit card debts.
- Midterm goals
Once you’ve achieved your short-term goals, it’s time to create and work on your midterm financial goals. Midterm goals are supposed to help you get from your short-term goals to your long-term targets.
Examples of midterm goals include
- Getting life insurance: If you have a family that depends on your income, getting life insurance can provide them with the financial security they need if you pass away prematurely.
- Paying off student loans: Student loans can be a significant setback and prevent you from achieving your financial goals. As a result, it’s a good idea to pay them off as soon as possible. This way, you can free up cash and increase your monthly budget for other essential things.
- Personal goals: Midterm financial goals can include your dreams, like buying a vacation home, renovating your current home, or even moving into a bigger house.
- Long-term goals
Long-term financial goals are your biggest goals. This includes saving for retirement – Setting up the Canadian Pension Plan (CPP) or another type of retirement plan is the most effective way to save for your retirement in the future. Other long-term goals include paying off your mortgage, saving for your children’s education, and starting a business.
Examples of Financial Goals
Here are examples of financial goals you can set:
- Emergency fund
Starting an emergency fund can help you prepare for the unpredictable things that may happen in your life. Having an emergency fund is crucial if you want to survive challenging life events.
Here are some examples of emergencies you might face in the future:
- Medical expenses
- Car accident
- Broken appliances
- Car repair
When you suffer from an unexpected and expensive event, your emergency fund is what will prevent you from taking the financial blow. The amount of money you save towards your fun can vary. But keep in mind that it takes around 9 months to find a new job after being laid off. As a result, you should save approximately 9 months’ worth of income if you think you might suffer a job loss in the future.
- Paying off debt
Paying off your debt is one of the most important financial goals. After all, no one feels comfortable knowing they owe banks and people a large sum. You can pay off your debt by committing to monthly payments. But remember not to borrow even more money – this will only add to your debt and drive you further away from your goal.
- Saving for retirement
Saving for retirement is a lifelong goal; the earlier you start, the better.
Retirement accounts are important because they provide you with much-needed income when you decide to stop working. You’ll have to continue working even past retirement age without a retirement fund.
Buying a home is one of the most rewarding goals you can achieve. Whether your goal is to pay off a mortgage, buy a home, or save for a down payment for a home, homeownership is one of the best financial targets you can aim for.
- Paying off your car
This is a fantastic example of a midterm goal. Having a monthly car payment can really restrict your budget. As a result, it’s crucial to pay it off as soon as possible. Once you’ve paid off your car, use those monthly payments for other bills and savings. Don’t go back to the dealership to hop into another loan! Instead, research the best time to do it to trade in your vehicle and start planning for it. What you could do is save for a sizable down payment for a new car and drive your old car until you reach that financial goal. Or make it a goal to buy your next car – without borrowing money!
- Invest in a college fund
Paying off student loans has become a common long-term goal. But parents can help by trying to save for their children’s education and college tuition. Additionally, if you already have student loans, you can pay them off quickly by paying more than the minimum amount every month and making bi-weekly payments.
- Planning for fun!
Most of your financial goals will be about being responsible, saving money, and saving for any future challenges you might face. But this doesn’t mean you can’t also set recreational financial goals! Ensure you always aim for at least one fun goal. This could be planning a holiday to Italy, buying a flat-screen TV, or even buying designer clothing. After all, you’ve worked hard to achieve all your other financial goals, so feel free to reward yourself with something you simply want!
Benefits of Setting Financial Goals
Here are four benefits of setting financial goals:
- Get a sense of direction
The right financial goals can give you a sense of direction.
What do you want to achieve?
Where do you want to be 5 years from now?
What’s your version of financial security?
Setting financial goals will help you get the answer to those questions. Additionally, knowing your goals will motivate you to reach them. Financial goals will also help you become more responsible and aware of what you spend your money on.
- Know how much you need to save
Another benefit of setting financial targets is that they’ll tell you how much money you need to save and when to achieve your goals. Additionally, setting financial goals means quantifying your targets, making them easier to accomplish since you know exactly what you need to do to get there. Ensure you track your progress toward your goals, and if things are progressing as quickly as you’d like, feel free to make changes to speed things up.
- Know what strategy to use
Your financial goals can help you form a set of strategies. For example, if your goals aren’t that ambitious, your strategy could be saving a small amount of money every month. However, if you have ambitious goals like saving up for an overseas holiday, long-term leave from work, retiring early, or even buying a house, you’ll have to have a more complex strategy. You’ll need to cut some expenses and invest your money to reach your goals quickly.
- Informs your career choices
The right financial goals can help you make crucial career choices.
For example, if you have ambitious financial goals like buying a new home, you’ll need to work harder to earn promotions, salary increments, and bonuses. Additionally, some goals might require you to work beyond the traditional 9-5 working hours. You can opt to start a side hustle, create your own business, or even work a weekend job. Ensure you don’t burn yourself out, though. While your financial goals are important, your mental health matters more.
Once you’ve set financial goals, ensure you align your career and wealth planning. This way, you can simultaneously move forward in your career and achieve your goals.
Tips For Setting Financial Goals
Here are a few tips for setting financial goals:
- Write them down: Ensure you write your goals down or use a goal-tracking application to monitor your progress. If you’ve written your goals down on paper, stick the list on your fridge or mirror. You can take a screenshot of your digital goals and make it your phone’s lock screen so you can see it all the time.
- Keep things specific: Ensure you set clear goals. For example, avoid saying, “I want to buy a house.” Instead, reword it like: “I will buy an $800,000 home by the end of December 2023. This way, you have a timeline and know how much money you need.
- Make sure you can measure your progress: By quantifying your goals, you can always see how close you are to reaching them.
- Personalize your goals: Don’t compare yourself to others, and set the same goals as them. Instead, set financial goals that are important to you and your future.
The final tip is to seek the advice of professional consults. Consults can create a personalized long-term financial strategy for you to reach financial success.
Consults can also:
- Ensure you make the right investments
- Create a wealth plan that suits your goals and willingness to take risks
- Provide the knowledge and guidance you need to feel confident and in control of your future.
- Help you identify what you’re spending most of your money on.
If you need help planning and managing your financial goals, visit the Nour Private Wealth website today.
Nour Private Wealth realizes all clients are different, and their investment and wealth planning needs evolve. Our team provides you with the expertise you need across all facets of the wealth management spectrum. From portfolio construction and wealth planning to insurance and private capital, we make it our mission to cover all bases to ensure your financial security over the long term.
Our clients are retiring or retired investors and enterprising business people who demand strong investment performance and exceptional service. We provide wealth management services to high-net-worth investors, including entrepreneurs, professionals, family trusts, private charitable foundations, and estates. We also serve a select number of institutions as clients.
Our services include:
Insurance products and services are offered through Nour Insurance Services Inc., a related and separate company from Nour Private Wealth Inc. Only products and services provided through Nour Private Wealth Inc. are covered by the Canadian Investor Protection Fund.
Contact us today to start achieving your financial goals with ease!