We are embracing goals as an avenue for financial success in this current series. If you missed the previous installments, I highly recommend reading them first (Part 1 and Part 2).
Financial goals are created much the same as our personal goals, with one major difference – they involve our finances.
Pretty self-explanatory? You’d think so, and yet a lot goes into making sure that your financial goals are not only specific enough that you can follow them but realistic as well. There’s nothing worse than having a lofty financial goal that only stresses you out as you try to achieve it.
Don’t worry – we’ll have those goals ready in no time!
Three Types of Financial Goals
There are three types of financial goals you need to keep in mind as you are formulating your own, short-term, intermediate-term (also known as mid-term), and long-term.
Short-Term
Most short-term goals are those that you anticipate happening within about a year. In some situations, that second year is included as well.
Examples of short-term goals can include: funding an emergency fund, paying off specific debt, adding to savings, decreasing expenses, and increasing income. Of course, any and all of these could be included in the intermediate and long-term goal plans if they will take you longer than the short amount of time.
Intermediate-Term (Mid-Term)
An intermediate-term goal is a goal that will take place two to five years from now. For most folks, intermediate-term goals include things like paying off the rest of their student loan, beginning to make investments, building up wealth, and taking expensive vacations. For some, it could include putting money aside for a child’s college fund or saving for a large purchase such as a house or car.
Long-Term
Any goal that will take you longer than five years is considered a long-term goal. This could include a large purchase, retirement, building up wealth, or anything else that you dream of financially for your future.
Common Goals
In addition to knowing the length of time that goal will cover, it’s important to know what that goal will be. A few of the most common goals (and maybe some of yours as well) include:
- Fully Funded Emergency Fund
- Completely Debt Free
- Retirement
- Living on Less Than You Make
- Savings/Wealth Build Up
- Big Purchase
- Ability to Make Investments
- Having a College Fund for your child
- Cutting back to One Income
- Having a Job You Like instead of a Job You Need
The options are endless and will be specific to your own family situation, so give it some thought as we detail a couple of the most common.
Debt Free
The goal of being debt-free is one of the most common. Between credit cards, student loans, car payments, medical bills, and home mortgages, families are overwhelmed and often unable to consider making more than the minimum payment.
Is that you? If so, I just want you to know that I’ve been there. It’s not easy to dig your way out from the bondage that is debt, and yet, it’s possible, no matter what your income looks like right now.
If your goal is to be debt-free, I’d like to ask you to consider a series of questions:
- Is there a specific debt I really want to be rid of and why?
- Is there any debt that doesn’t bother me to make a monthly payment on for the rest of my life? Why?
- Is there a specific time frame that I would like to be out of debt (reasonably)?
- What will I do with the freedom that comes with being out of debt?
- What am I willing to sacrifice to make it happen?
I ask you these questions to get you thinking about your motivation. Paying off debt, like I said, is hard and if you aren’t motivated to stick with it, then you will be right back to square one, and even more frustrated.
Hold onto those answers: you’ll be using them later in this process.
Tip: Grab the FREE Debt Goals Worksheet to walk you through this process! Find it HERE.
Purchase Goal
This is my favorite because it’s our long-term goal to make a large purchase: hopefully a lake house. When our kids graduate from high school (not too far off) we want to downsize from the large home we have to a small place out on a lake we love. It’s been the long-term goal for a lot of years and will continue to be something we work hard towards.
If you, like us, have a large purchase that you want to work toward, it’s important to ask yourself the following questions.
- How much will I need to make that purchase?
- Am I interested in taking out debt in order to do so, or will I pay in cash?
- What will be the tradeoffs in order to make it happen?
- What the timeframe involved?
- Once the purchase is made, what will it be used for?
There’s nothing wrong with planning for and making a large purchase, just make sure it’s a goal you are motivated to stick with!
Tip: Grab the FREE Purchase Goals Worksheet to walk you through this process! Find it HERE.
Large Savings
A lot of people will come right out and say that the reason they want to get their finances in order is that they want to have a lot of money in the bank. While that’s a great thought in everyone’s mind, if this is your goal, I’d like to have you answer the following questions.
- What does A LOT of money look like to you? Give a specific amount.
- Why do you want to have A LOT of money?
- What will that money be used for?
- Do you have a timeframe for compiling that money?
- What are you willing to sacrifice in order to get that money?
Once again, it’s just a few questions to get you thinking about your motivation behind that goal.
Tip: Grab the FREE Savings Goals Worksheet to walk you through this process! Find it HERE.
F.I.R.E.
You might have heard of the term F.I.R.E. with regard to family finances; in fact, it might even be your goal, in the short- or long-term. The acronym stands for Financially Independent, Retire Early. It’s a growing movement of young adults (late teens to early thirties) striving to get to that financially independent sweet spot in order to retire early.
To most of the F.I.R.E. participants, “retirement” looks a little different than what we think of as a traditional retirement. While someone in the 65-year range plans to quit their job and not work again, those in the F.I.R.E. community prefer the idea that “retirement” doesn’t necessarily mean they quit their job, but that they are no longer tied to it out of necessity to pay bills.
Many do choose to leave their positions and look for more flexible work that really allows them to spend their time doing the things they love, whether that be traveling, spending time with family, or whatever else suits their fancy.
This process of becoming F.I.R.E. is ultimately no different than any other long-term financial goal. It takes motivation and perseverance, and it’s more likely to take extensive sacrifice because of the quick timetable.
If you are contemplating F.I.R.E. as your long-term goal, I’d like to have you ask yourself one question: Why?
By answering that question (making sure to ask your spouse too) the idea is that you will find your motivation and, hopefully, fuel the desire to stick with the process until you meet that end goal: financial independence.
Your Turn
As you can see, there are many different types of financial goals out there. It’s up to you to decide what financial goals you should have. Perhaps you want to be completely debt-free in two years, or maybe you just want to pay off (and close) those credit cards before your child graduates middle school.
Anything is possible if you set your mind to it, so dream big. It might take some adjusting as we continue through the process, but don’t let the magnitude of the goal keep you from making it and then working to achieve it.
- Make a list of your financial goals for your family. You don’t have to know how you will accomplish them at this time, just list the goals you have for your future.
- For married couples: have your spouse make their own list and then compare notes with one another, looking for overlap. Discuss which goals are of higher priority.
- Combine your list of goals to the best of your ability.
This is where those personal goals from the last installment come in handy. Make sure to reference them and determine what you will need to do financially to achieve them.
Tip: Grab the FREE Financial Goals Worksheet to walk you through this process! Find it HERE.
It’s all about the Future
Once you identify what financial goals you should have, it’s time to get excited! If you are anything like me, you are probably wondering how quickly you can get that budget put together (or revamped) in order to achieve your goals directly. If that’s the case, you really won’t want to miss our next series “How to Implement a Budget & Achieve Your Goals”.
Mind sharing one of your goals with us in the comment section below? I’d love to hear what you are hoping to accomplish!
