Financial goals –like life goals, turn your financial dreams into reality. They are a road map of your financial life.
Defined financial goals that are specific and have a timeline are easy to achieve.
Studies suggest, the simple act of writing down your financial goals, gives you a 42 percent chance of achieving them.
Unfortunately, majority of us don’t write them down. And, therefore end up in the 58 percent cohort that seems to struggle.
Don’t wait for money and success to come knocking on your door. Or luck in that case. Go for it.
By the end of the day, life won’t smile at anyone. You will have bills to pay, kids to take to school, the retirement plan to cater for and a student loan yet to be paid.
All it takes is a simple first step: have written financial goals in place. And make it as realistic as possible.
1. Harmonize your lifestyle and financial goals
The foundation of any successful personal finance goals starts with lifestyle goals.
We all have wishes, aspirations and dreams we’d like to fulfil in life. The financial goals you settle on should serve to fulfil these aspirations.
You have to harmonize them to make the achievement of either easy.
Remember finances influence how we live. And how we live influences our income.
You may want to:
- Clear your mortgage in 3 years
- Buy a house in cash by the end of the year
- Clear all debts by April –student loan, car loan, miscellaneous debts and be free
- Build wealth
- Start an online business
- Go to yoga and gym 3 times a week
- Eat organic
- Visit Kruger national park… etc.
Whatever you settle on, remember financial goals affect life goals. Similarly, your life goals affect your finances.
Therefore, to curate sound financial goals, there is a need for you to curate a vision board. It should have what you want in your life, where you want to be and how you are going to achieve all that.
These timelines and life goals will be your north star. It will guide you through successful life and personal finance goals.
2. Financial goal: Have a short term, medium range and long term financial goal
Your financial goals should be smart. Smart goals are specific, measurable; action-oriented and have a timeline attached to it.
By nature, financial goals are monetary targets aimed at meeting future financial needs.
For example, retirement savings serve to offset financial needs when you retire. Sinking fund, on the other hand, is for future planned spending.
Therefore, financial goals are classified as a short-term, medium and long term. This classification is on the based on the date of maturity of the money.
Timelines allow you to budget better. You will know how much to allocate to every goal at what time.
In the process, you will be able to achieve more with the meagre earnings and live with more freedom.
3. Savings goal: Save enough, purposely and intentionally
How perfect is your saving game?
I must confess that I struggle with saving like everyone else.
I had a perfect saving plan and implemented it perfectly well. But at the end of the year, it never amounts to anything to smile about.
I’d feel demoralized taking into account the impact my financial behaviour has on my short term and long term financial goals.
Amidst all the struggle, discipline and thrift, I barely have enough to fulfil even a short term goal.
So what used to happen to me?
Yes, I used to save well. But I came to the execution part of the strategy was poor.
I had no emergency fund to take care of the impromptu situation.
I had not thought of sinking funds for large expenditures.
All I did is stash away as much cash hoping that I am saving for a mortgage down payment. Only for an emergency to arise a few months later and mop out three-quarters of my savings in a few days.
And, I would feel helpless and disappointed.
If you want to achieve something. If you want to achieve your financial goals and not feel the pinch or burnt out you much have a strategy. Have a robust game plan that will not stretch you thinly. One that will enable you adequately takes care of fundamental.
Make sure it encompasses the amount you are able to save. Based on 50 20 30 rule, this amounts to 20 percent of your income.
In your savings goals, have an emergency fund. A sinking fund. And, classify all others as long term medium or short term goals.
Above all, have a budget to guide you through the whole process.
This is what saving purposely and intentional entails.
4. Have a healthy emergency fund kitty in place
What happens to your finances when emergencies arise from nowhere?
- Your car getting stolen
- Suddenly lose your job at the time you needed it the most
- Getting critically ill and the insurance provider feels you put yourself at risk.
These are the times when your emergency funds kitty comes to your rescue.
An emergency fund is a saving for sudden unannounced and urgent life situations. It saves you from desperation embarrassment and going into debt.
Personal finance experts argue, when still in debt, shelve some $1000 for emergencies. As your financial situation improves, increase it to 3 – 6 months worth of monthly expenses.
On the safe end, you should save enough to last you 6 months to one year of staying without a job.
Emergency fund is a must-have. There is no other safe way around it if you want your finances (and financial goals) in the healthy spectrum.
5. Set up sinking funds for future large spending
A sinking fund is a type of savings account. They are funds set aside to cater for large future spending without going into debt.
The good part of the sinking fund is it’s deducted before the money gets into your account, so you don’t feel the pinch.
- You can arrange for that anniversary several months prior to.
- Throw the biggest birthday party for your twins
- Save for the wedding gown and the diamond ring
- Plan for a family tour of the Scandinavia or African Savannah
- Or even as simple as buying that dream stilettos, Lamborghini or luxury yacht.
This is the beauty of the sinking fund. You fulfil life goals without hurting your short term and long-term financial goals.
6. Income goal: Strive to earn more money than you do now
Earning enough money is good. Earning from a diverse pool of sources is even better.
More than one stream of income is a buffer to financial shocks. And there are many financial shocks in life.
Make your financial future solvent. Create multiple income streams to serve you even in the times hard hit by economic hiccups.
Start a business
Start a business that benefits society and people will buy your idea. Make some profit from it and you will have more money.
Ask for a pay rise
Enrol in a class to gain crucial skill based on your assessment of your work environment. Demonstrate that skill and seek a pay rise commensurate to the benefit you add to the firm.
Slash on the things you don’t necessarily need now. It will leave more money in your pocket and has the same effect as earning more. So, do you really need $500 haircut when you can get better at a lower cost? Just shop around
Create passive income streams
Earn money to fulfil your financial goals even when you are working. Passive income is one of the ways to do so. the $10 dollars you grab here and there adds ups at the end of the year. You never know how much an extra $4,000 paycheck can do to your financial goals. Always look at the long term.
The thought of you earning more may seem an uphill task. Of cos, nothing good comes easy in life. But, all you have to do is start. A year later you will look back and smile at the decision you made this day.
7. Upgrade your passive income game
How many passive income streams do you have?
By passive income streams, I mean avenues that continuously pay you even when you are not that active.
After graduating, I got an internship position at a multinational organization. Our work was simple. We analyzed economic data and interpreted policies for different regions of the world. This was an easy job. I had a lot of free time to read my own stuff.
It is at this moment I got the full attention of the concept of passive income streams. After doing enough research (which I was very good at), I became convinced it is a viable option. in my free time, I decided to set up a few online streams and they did not disappoint.
Fast forward, here I am now. I am deep into creating income avenues that feed my financial goals.
And, there are many ways you can do it too. Whichever you’d prefer, make sure you do your homework enough and work on it.
8. Make a budget and abide by it
As part of your financial goals, make a budget and make sure you abide by it. The basis of all successful budget plans starts with being realistic. A realistic budget stands the highest chance of you following it than an unrealistic one. In it, capture all your expense, estimate income and how you are going to spend it.
According to studies by U.S Bank, 41% of the Americans use budgets to plan for their spending. Forty-one percent is a good number. But what is stopping the remaining 59 percent from operating with a budget?
It is no secret that when you operate under a budget, however small your income is:
· You will have less stress with money matters
· You will account for your every coin you earned. This limits unnecessary wastages and you end up saving more.
· You will have better control of your money. Since a budget allows you to structure your spending, you will direct your money to what matters most.
According to budgetary guidelines, a good budget follows the 50/20/30 rule. This means 50 percent of your after-tax income should go to your needs. The needs are essential spendings like transport, utilities, and rent. The 20 percent of your income should be allocated to fulfilling your financial goals. This includes saving, paying the debts and investing. And, the remaining 30 percent is your wants. These are flexible expenses that vary from time to time. They include groceries, gas, shopping and dining out.
Tip! Make a budget and abide by it.
9. Stay away from credit card and other debts
At one point in our lives, all of us will be in debt. It’s part of an existential problem to all of us in this 21st century.
In as much as debt is good if you put the borrowed money to good use most often it is not.
Finding a way to reduce or do away with debt is the best justice you can do to your life. And, once out of debt, stay out and start building wealth.
But how do you stay away from debt and the associated debt trap?
Here are options you can take to stay away from debt.
Option #1: Negotiate your loans
You can negotiate with your bank or credit card Company to have your interest rates lowered. Sometimes all it takes is to ask.
Option #2: Restructure your debt
You can seek a loan facility from companies with lower interest rates and a long grace period. Use it to offset the high-interest loan.
Option #3: Earn more
You can dedicate your time to earning more than you do now. Start a side hustle. Build multiple passive income streams. Get a part-time job etc. Use the extra income to offset your debt.
Option #4: Spending
You can decide to cut down spending on things you do not really need. Live within your means or even below your means. You will be surprised by how much you can save.
Option #4: Maintain a good credit score.
A good credit score allows you to seek finances cheaply.
Option #5: have an emergency fund in place
An emergency fund will stand in for unplanned for situations in life. It will save you from borrowing to offset sudden unplanned life situations.
Option #6: Build your sinking fund
A sinking fund plan allows you to make huge spending in future less painful. You will have to save enough money and be ready for such expenditures when they come. There will be no need for borrowing.
When debt piles up over time, it leads to what we call the vicious cycle of debt. At this point, it is damaging your dream of realizing true financial independence. And, trumps your dream of building wealth.
Doing away with it allows you to,
Have full control over your income.
Leaves you with more money in that you can save enough invest and spend as you wish.
You can quit your job anytime you feel it is no longer serving you
You will free your mind of constant worries and stress associated with debt.
Therefore, if you get out of debt, make sure you stay out.
10 Live within your means
Learn to live below your means, so they say. That is not bad advice in itself. But I would say, learn to live within your means.
Why do I say so?
Most of us are already financially stretched thin.
The paycheck barely covers our needs (leave alone our wants). Therefore, living below a paycheck that barely feeds you is a form of self-imposed slavery.
- Have a working budget in place to guide you through.
- Be a minimalist on your day to day life, not thrifty. No one likes a thrifty person. No even your children.
- Track all everything in order to make informed decisions. Do track your spending to know where you might be wasting money in. Track your investments to see your future trajectory –how much you will earn in 3 years.
- Avoid unnecessary purchases.
- Eliminate expensive habits like gambling, heavy drinking and partying and smoking.
- Pay in cash.
- Keep away from impulsive buying. You will discover you don’t use half of the things you bought.
Above all, live within your means and be content with life. Knock down your financial goals. Feel and be happy. Life is not about how much you have but how well you live content with what you already have.
11. Upgrade your retirement savings game plan
Is your retirement savings factored in, in your financial goals? How well is it catered for?
Saving for retirement has never been an issue with most people in the world.
Most governments have pension schemes for retirement savings. They are mandatory for everyone who earns to have a retirement plan.
However, the problem lies with modern day entrepreneurs. I call them soloprenuers.
Retirement savings as part of the larger financial goals is never covered adequately by this cohort. And this trend is dangerous to the overall financial health of an individual.
Even for those in the formal employment where retirement is well captured and protected by the law, the contributions are not enough.
You should aim to upgrade your retirement savings plan, as part of the larger financial goals.
- Having a retirement fund in place first
- Factoring the retirement plan in your budget
- Increasing your levels of contributions to meet your post-retirement financial needs.
- Start planning for your retirement early enough. You will retire with more money thanks to the compounding effect of your money over time.
12. Do your taxes early enough
Do your taxes early and avoid the last minute rush.
Last minute rush makes you prone to mistakes.
These mistakes and errors might prove very costly some times.
If you will need to consult a tax specialist, then doing it early is also cheap.
13. Start investing wisely and automate it
In today’s world, you do not need to have studied finance or hire the finance guys to start investing.
The normal Joe and Jane in the street can invest wisely and make fortunes in the comfort of the couch.
This is possible thanks to algorithms that spread the risk, limit loss it and allow us to invest in the healthiest portfolio.
Simple smartphone app (app store and play store) like Acorns (grab the $5 signup bonus) and stash allow you to invest like a pro and watch your money grow.
The apps automate this process in that it happens in the background and it automated.
14. Get personal finance education
Knowledge is power. If you have no time to gain personal finance knowledge, then you don’t know how expensive financial misinformation or ignorance is.
Make it your short term financial goals to read at least a book or two every 3 months.
So where do you start?
Grab a few must-reads including:
In any case, you are running short of time, you can as well listen to these books in beautiful audio on the go.
Subscribe to a few podcasts, read good blogs, YouTube channels and listen to TED talks.
There is always something to learn every time.
15. Get organized financially
Lean and fast is way better than being all over.
Organizing your finances will not only make you lean and fast, but smart too. You always learn and improve.
Step #1. Have a budget in place
It will organize your spending and keep you accountable for every coin spent.
Step #2: Have a financial goals chart
In it, indicate what goals are short terms, intermediate and which ones are long term goals.
Step #3: Keep clear accurate records of all your finances and financial goals.
Studies show by writing financial goals, you stand a 42 percent chance to accomplish them.
Step #4: Track your goals
Tracking your financial goals gives you data from where you draw conclusions. Use the conclusions to better your overall financial health.
16. Set up an overdraft protection facility
Are you familiar with overdrafts?
An overdraft occurs when you withdraw more than the balance you have in a bank account.
According to FDIC data, banks earned over $34 billion in overdraft fee last year. The number was even higher years after the 2008 depression.
Another research indicates that 90 percent of the people who took an overdraft did it by mistake.
Worse is that half of them don’t believe they opted for such in the first place. And a 3rd closed a bank account due to overdraft disappointment.
Spend a few minutes in your bank setting up overdraft protection mechanism. Or, get slapped with $35 overdraft fine.
Linking your accounts takes 15 minutes only and you will be cushioned against such.
If you think this is a non-issue, Americans paid 34 billion in overdraft fines in 2018. This trend is bound to increase as the years go by.
The funny part is, most overdrafts are drawn unintentionally.
17. Diversify. And always diversify
As the old saying goes, do not put all your eggs in one basket. Have more than one income streams and invest in multiple investment options.
Always aim to diversify your investment and savings plan.
18. Get insurance cover that serves you
19. Shop for the best bank to take care of your money
20. Jealously protect your credit score
Increasing your credit score should be a top priority in your personal finance goals.
With a better credit score, your life gets easier.
Here is what happens:
Credit companies perceive you to be their best friend (low-risk individual) when you have a good credit score. As a result, you enjoy low interest rates cash back opportunities and other free gifts.
When you have a bad credit record, you become their enemy (high-risk individual). They become reluctant to lend to you. How do they do this lawfully? They charge you a higher interest rate to compensate for the likelihood of you not paying them back on time.
Low-risk individuals enjoy lower interest rates on average compared to high-risk ones.
The lower the interest you enjoy the easier your life becomes. Over time, you end up saving a lot of money which you can invest in return.
21. Have a Side hustle
Studies show a huge population of the millenniums have a side hustle or are planning to have one in the short term. Of those that have a side hustle, almost half of them make an average of $500.
This is a good amount of money to offset a huge chunk of bills for an average income person. The best part is, you earn all that on the side.
Among the most popular side hustles include:
- Paid survey networks
- Starting a blog
- Claim free gifts
- And, taking on a second job.
22. Build Wealth
It is good to make more money. But it is better to build wealth.
Money is good. But it is not wealth.
Wealth is what you get with the money and it pays you or improve you in value and raising your net worth over time.
As part of your long term financial goals, aspire to build wealth.
Invest in self-education and demonstrate the new skill you acquire. The knowledge you acquire will never lose value. It will continue to pay you greater dividends throughout your life.
Invest in new emerging opportunities. Take advantage of the new opportunities before everyone else jumps into the bandwagon. Being a pioneer will give you an edge over the rest of the cohort.
Accumulate assets. Accumulate as many assets as you can over your lifetime.
Invest in stocks and bonds that have a promise to pay better returns. Do your homework well before making a move.
Get into the property ladder. Properties rarely lose value in the long run. You will eventually end up richer.
Above all, make sure your long term plan (the end game)I to build wealth. Start where you are now. Start small and grow with time. Time is one of the major factors in the science of wealth building.
24. Lastly, be financially smart.
Financially smart guys/chicks always win.
They rarely get screwed or do they fall into stupid financial traps.
Talking of financial traps, there are a lot of them out there. People lurking in dark corners waiting for you to make a single wrong move, and your money is gone. For good.
These people are not only found online. They are everywhere. In the stock market. Companies defrauding people.
And, some of them are financial specialists. You call them the bad guys. The Hawks. Every industry has them.
Smart guys learn before committing their money. They know the basics before they act. They ask where they don’t understand.
If you go on investing in Bitcoins because Joe says so, you deserve to loose your money.
I don’t mean to be ruthless but the point is simple, smart guys learn first before committing. They follow their inner voices too.
25. Bonus Financial Goal: learn to manage the little you have
“If you want to achieve a life of plenty you will have to focus on earning more money than you do now. Earning more money will cure your financial pain points.” Wrong!
Earning more and not managing it well results in the same effect of not earning enough.
Many of us already earn enough to live a simple posh life. But we are not living the life we want, why? It is because our money management skills are poor.
The basic knowledge of money management and money management systems will reduce finance-related stress by close to 90 percent.
Basic knowledge of:
- How to do smart budgets
- How to save money
- Ways to pay off debt
- How to differentiate a bad loan from a good loan
- Tips to build real wealth which is often confused with making money (more money is not wealth)
- Ways to earn more money so that you can build wealth for yourself.
… will go a long way to help you live the life you so desire with the earnings you already have.
Having more money in your hands is important. If you don’t know how to manage it well, it will slip through your fingers.
Learn simple money management skills. Use the knowledge to design a money management system that works for you. Incorporate your financial goals into your system and you will be in the right path to realizing your financial goals.