Why Setting Personal Financial Goals is Necessary

financial goals
The buzzword lately, when it comes to finances, is what everyone wants to achieve which is “financial freedom”. When we talk about “financial freedom”, most of us associate the term with our income level. We want to basically increase our income so that we can feel unburdened by financial worries. Most people think that by having a passive income more than enough to cover expenses will constitute success in our finances. However, there are other legitimate concerns that we need to address on top of just making more money. We need to answer some of these questions to really ensure that we are moving in the right direction concerning our financial well-being.

Basic Questions

  1.  Do we have sufficient funds available to meet the increasing cost of our children’s education in the future?
  2.  Are we saving enough for the kind of retirement needs that we envision for ourselves?
  3. Do we need to invest our money on other things that will yield more than what the banks are giving for our savings?
  4. Are our families protected financially even if we as breadwinners are no longer around?
  5.  Do we have protection from the financial consequences of having critical illness?
  6. Finally, have we planned for the disposition of our will with all the estate taxes associated with it?
Thinking about these things will tell you that attaining financial freedom is not as simple as we may think it is. It should involve the right amount of planning so that we can take the appropriate steps to succeed. But before that, it should spell out our financial goals which address our aspirations for ourselves and our family both short-term and long-term. Goals need to be written down. True, we should know them by heart but we should also remind ourselves in case we lose sight of why we do the things we do.

Goal-Setting Tips

In setting financial goals, we need to make sure they are SMART (Specific, Measureable, Achievable, Realistic and Time-bound). A poorly written goal can be easily ignored or forgotten. If it’s not specific, we cannot formulate specific steps to achieve it. If it’s not measurable, we won’t know how far we still have to go to get it. If it’s not achievable or realistic, it will be a worthless goal. If it’s not time-bound, it can take forever and we won’t feel a sense of urgency to work for it.

Once we have set our financial goals, we can go ahead and plan our actions that will achieve them in the most effective way. That is why goal-setting for personal financial success is critically important. The goal will serve as the guide posts to know whether or not we are pursuing the correct path. Once we see that we are diverging from the goals that we set out to achieve, we can always alter the plan and make the appropriate adjustments necessary to get better results.

Personal Experience on Financial Goal-Setting

My fiancée and I have spoken a lot about our family’s financial goals which apply these goal-setting guidelines I have spoken about. We now have two young kids but we still do not own a house. I am currently renting an apartment near my workplace while she lives with her mother together with our two kids. Consequently, one of our specific goals is to build our own house in three years’ time. My fiancée owns a lot so we know how big the house we want to build and the corresponding amount that we will need for it. To achieve this goal in three years, we have decided to save money specifically for that aim. The plan that we came up with involves saving enough money for 20% of the amount of the house that we will build then, getting a loan for the remainder from the housing fund of the government. Since we know the time frame we have set for our goal and both of us have a job, we came up with a specific amount we need to save on a monthly basis. From this, we were able to generate specific steps on how we can save that amount consistently month-to-month. We have also discussed the possibility of investing the money to low risk funds so that it will earn more in three years than what we can get from any bank. Thankfully, we are progressing as planned.

If you have any financial goals you want to share, just leave a comment.