Setting financial goals involves clearly defining short-term, intermediate, and long-term goals. The idea of setting a financial goal is a very important step towards ensuring that you become financially secure. This is because a lack of financial goals may make you end up using more money for irrelevant reasons than you are supposed to do. This may make you end up being short of money when unavoidable circumstances in life arise. This short of money may leave you vulnerable than you need to be, to handle major risks in life. For this reason, it is therefore important to set financial goals which should be specific, measurable, attainable, realistic, and time-bound (SMART). In this essay, I will discuss the steps I will take to help me raise financially from the current financially struggling state at my current age of 20 years to a well-secured financial state at the age of 65 years old.
Short-term goals take little time to achieve, such as one year. They help in providing foundation, confidence and enough knowledge you need in achieving the other financial goals which take more time to achieve. It is the continued achievement of these short term-goals that leads to the achievement of the long-term goals.
To start with, I will establish a one-year personal budget. In the budget, I will do some simply mathematics to establish my spending. I will evaluate all that I just need for daily spend. In this, I will assign $1 for a break first, commit to be using $1.5 for lunch and ensure I use $2.5 for supper. This will be costing me a total of $5 per day on meals. For any reason that may come along during the day, I will add an amount of $0.5 for miscellaneous usage. This will be a total of $5.5 per day which means it is $38.5 per week and $165 per month. With this simple mathematics, it will be very easy for me to check if I am moving to realize this goal.
I will then work to clear all my outstanding credit card debts. Loans have an ever-increasing interest which may end up consuming my money upon delayed payment. On my basic salary of $400, I will set a goal and get committed to it to clearing all my debts in a two-year time. I will be making sure I save $50 per month to realize enough money by the end of two-year time to pay off my loans. This will make me free from debts and enable me to focus on other goal in life.
I will start my emergency fund project. This will help me cater for my family needs during times of hardships. To achieve this, I will open a savings account and set an automatic money transfer of $25 per month from my salary account to this account. I will use this automatic method to ensure I am committed to saving in order to realize this goal. I will be using this money when there is a sort of job or any other unexpected risk in my family.
Intermediate Financial Goals. In this level, I will set goals that will be taking around two to ten years to come to completion. These goals act as a bridge between short-term and long-term goals. They will help me clear challenges with medium weight and start projects that will help me achieve future dreams.
It is at this point that I will enrol in insurance. During this time, I will be at the age of 25 years. Thus, I will be having a family. Therefore, I will take a life insurance cover to take care of my family in case I pass away prematurely. More also, I will take disability income insurance cover. I will use this as security for salary payment so that in cases of a seriously illness or injuries that may make unable to attend a job, I will be receiving a salary to cater to my family’s needs.
I will then mobilize money from my salary to clear all my student loans. These loans are capable of fostering a great drag from my monthly budget. If therefore cleared, they will provide me a chance to divert attention and focus money to other financial goals. I will sacrifice one and half a year to save money for clearing all my student loans. At this point, I will have insured my family and me as well as cleared all previous debts and loans that were a great drawback to my future goals. Now, I can focus on future investments.
Now it is time to define my future, my dream. I have a family and a home. I am not happy with our current home. I will mobilize money to upgrade it. In this, I will set a target of saving 10% of salary for ten months to ensure this is in effect. I will also plan to have a private car for my family worth $10 000. This will be a 12 years goal. To achieve this, I will be saving $70 per month for twelve years. I will be evaluating the success of this goal monthly by multiplying the number of months by 70 and confirming if they coincide with the target.
Long-Term Financial goals
At this time, I will be done with past deeds that were dragging my financial status behind. I will also be done with current situations that aid the smooth running of daily financial needs. My worries and goals here will be about future preparation.
I will need to live a luxurious life after retirement, free from financial difficulties. Thus, I need to save more so that the money will be enough to sustain my needs on retirement. To do this, I will ensure I will be saving 15% of my salary every month so that by the time I will be retiring at the age of 65 years, enough money will have accumulated. I will also increase my retirement savings by getting involved in Employer-sponsored retirement plans by contributing enough amount of money to get my full employer match.
Through this essay, it is, therefore, very important to set smart financial goals. This is because achievable financial goals will help me to be independent and be able to rely on myself for what I need and not having to worry much about various risks in life.