In the budgeting post, I shared 10 hacks to help you manage your money better. One of the tips was setting financial goals. Ever since I realised the power of setting S.M.A.R.T.E.R goals I kind of developed into a goal-setting geek overnight. In my opinion, financial goals are the backbone of all other goals. If you do not manage your finances well, it will be quite difficult to attain the rest of your goals. I find that defining what I want to work towards and actually having a concise plan to get there is what works for me. Here is a helpful guide to help you get started on your financial goal setting journey.
1.Classify your goals
Financial goals can be divided into short-term, mid-term and long-term goals. Classifying your goals will give you room to gradually clean up your financial mistakes while setting up systems to help you achieve your goals. Short-term goals include setting up a budget, paying off short-term debt and creating an emergency fund for unexpected expenses. On the other hand, mid-term goals include getting life insurance, paying long-term debt such as student loans and other goals such as buying your first car or owning your first home. Finally, long term goals include a solid retirement plan.
2. End your addictions
If you are addicted to something, you are bound to wasting your money to get more of that thing. By learning to live without your addictions, you will free up your money without having to increase your income. Do not be reluctant to read books or seek help to get rid of your addictions.
3. Create multiple streams of income
If the ongoing conditions can teach us something, it is that you cannot put all your eggs in one basket. Diversifying your income streams will go a long way in securing your future. A side hustle or a freelance gig is important to have since it increases the amount you earn. In case you lose your job, your other streams of income will come in very handy.
4. Live on less than you earn – Financial goal setting strategy
Living below your means is an effective strategy to grow your income. While multiplying your sources of income is important, it only counts if you put it to good use. The extra money can be used for investments, emergency funds and clearing debts to set you up for a financially secure future.
5. Pay off debt – Financial goal setting strategy
The sooner you pay off debt the sooner you will have full control of your money. This also increases the amount you have to spend, save and invest. Debts like student loan and mortgage might be good in the beginning but over time they are also expensive.
6. Save frequently
Always save when you can. You can divide your savings into short term savings which include saving up to buy an item or long term savings, an emergency fund for days you lose your job or you suddenly develop health complications. You can either choose to store your savings in a savings account or you can diversify your portfolio and invest some of it in different areas.
7. Plan to do what you love – Financial goal setting strategy
I believe the purpose of having money is independence. To free up time, so you can do whatever you want to whenever you want. Ending your addictions, creating multiple streams of income and living on less than you earn should help you be able to do what you love. Additionally, retirement does not really involve sitting around doing nothing, so you might as well plan to do what you love in the long run.
8. Take insurance
Finding an insurance cover that is not expensive but caters to your needs is quite difficult but doable. For life insurance, experts recommend sticking to the cheapest one so that you can buy just as much as you need to avoid being worth more when dead than alive. Also, take the cheapest car insurance if you have a history as a safe driver. In contrast, it is advisable to take the highest health insurance you can and also an emergency fund on the side.
9. Plan for retirement
I used to think retirement is sitting around and watching the sun go up and down every day, but I have come to realise that simply is not it. This emphasizes the need to plan to do what you love so that you can take mini-retirements throughout your life. I first heard of this concept from a book by Tim Ferris, he has written some blog posts about it too, and after a little research, this is what I strive to do. It is important to plan for retirement since you will not always be as strong as you are to work.