Financial goals are essential in helping individuals save money, plan for retirement, pay off their debt, and build lasting wealth. Setting financial goals can help you stay on track and make sure you have the money you need to achieve the life you want. You want to use your budget to help you create a specific, measurable, and realistic goal that you can reach in a few months to a year.
Establishing a Budget
The first step in setting financial goals is to establish a budget. A budget will help you outline your income and expense, with the goal being that you spend less than you earn. When starting a budget, tracking your spending is important to make a more accurate budget. This can help you identify areas where you can cut back on certain spending. If you’ve never tracked your spending, start tracking for at least a month, ideally more, to get an idea of your spending habits. In addition, a budget can help you establish a line item for savings to help you reach your financial goals. Including your financial goals in your budget can help you stay on track to reach these goals.
Creating Financial Goals
Once you’ve established a budget, you can start to create financial goals. It’s important to make sure your financial goals are realistic and achievable. Start by making short-term goals, like saving a three-month emergency fund, that you can work toward in the next few months. You can also set long-term goals that will take multiple years to achieve, like paying off student loan debt. When creating financial goals, it’s important to include specific steps and timelines so you can measure your progress. These steps should include how much you plan to save each month and how long this goal should take you. Use your budget to see how much you can realistically save each month for these goals. This can help you set timelines that you can actually reach.
Saving for Retirement
One of the most important financial goals is saving for retirement. This may seem like a daunting financial goal, but with the right planning, it can be achievable. Retirement planning is important for everyone, no matter what age you are. Start by finding out how much you need to save for retirement and then establish a plan to reach your goal. Next, you can add saving for retirement to your budget. To save for retirement, you can open a Money Market Savings Account, a Traditional CD IRA, or Roth CD IRA, and set up automatic deposits. If your employer offers any matching towards your 401(k), ensure you contribute the minimum to receive this match. If you decide to open up a Roth IRA, make sure you contribute the maximum amount you can each year. The IRS establishes this amount and can change from year to year.
Building an Emergency Fund
Another important financial goal is to build an emergency fund. An emergency fund is money you set aside for unexpected expenses, such as medical bills, car repairs, or even job loss. It’s important to have at least three to six months’ worth of living expenses saved in an emergency fund. Again, knowing how much you spend from your budget can help you know the total amount you need for your emergency fund. To build an emergency fund, start by setting aside a small amount of money each month and gradually increasing your contributions over time. Once you reach this goal, you can use the money you set aside each month for another goal. One way to contribute to your savings is with a SaveUp Account. This enables you to build savings by either rounding up or transferring a flat amount into your savings account with each debit card purchase. It is a great way for you to set aside a little bit of money every time you make a purchase.
Debt Pay Off
Paying off debt is another important financial goal. To create this goal, start by writing down all of your debts and their interest rates. Then make a plan on how to pay that off, beginning with the smallest debt or the highest interest rate. Next, with your budget, you should have a target date to pay off each debt. Finally, continue to make monthly payments, and with each loan you pay off, that monthly payment can go towards another goal.
Final Thoughts
Setting financial goals is an important step in becoming financially secure. With financial goals, you can create a plan to save money, pay off debt, and increase your net worth. These goals can also help you manage your spending and build an emergency fund. In addition, creating and achieving financial goals can give you a sense of control and accomplishment and can help you plan for the future.
Sara DeSantis, 12/20/2022
Community Resource Federal Credit Union