7 Reasons You Need to Set Financial Goals
Why is it important to set financial goals? Here are 7 reasons why you should start setting financial goals.
Building wealth is simple but it does take time and a little effort. Like any activity, be it growing a business or learning a new skill, you need to decide early on what your long-term objectives are.
It’s exactly the same when you are building wealth, it is important to set financial goals.
If you know what your financial goals are, you can start working to accomplish them. And working out what those goals are is the very first step.
Long-term Financial Goals
Some of us aim high, wanting complete financial independence and stability, to have our own home, start a family and be able to give our children time, or to be able to afford to give up work and travel.
Other examples of long-term financial goals include:
- Saving for retirement.
- Paying off your mortgage.
- Saving for a child’s education.
Goals like these are called long-term goals because they take time to achieve.
Short-term Financial Goals
But there are plenty of smaller, more modest financial goals, too. Perhaps you want to clear your overdraft or get out of credit card debt, be able to eat out more often, or save up for a summer vacation.
Other examples of short-term financial goals include:
- Paying off all your debts.
- Building an emergency fund.
- Buying a home or saving for home improvements.
- Saving for travel.
- Starting a business.
These are called short-term goals that can help you reach your long-term goals.
For example, getting out of debt will help you save towards a house deposit to own your own home.
Short-term financial goals are equally important and easier and quicker to achieve.
7 Reasons Why it is Important to Set Financial Goals
Setting financial goals is essential to financial success. Once you’ve set these goals you can then write and follow a roadmap to realise them.
It helps you stay focused and confident that you’re on the right path.
Without further ado, here are seven reasons why you should set financial goals, and how they’ll help you achieve success.
Reason #1: You Need to Know Where You’re Going
What are you trying to achieve? How will you define success?
Setting financial goals will help you to answer both of these questions. Once you have your answers — which will be unique to you and your personal and professional situations — you will know what your end goal is and what you need to do to get there.
We all have the capacity to make changes in our lives for the better, and with an end goal to work towards making the right decisions become easier.
With an end goal to work towards making the right decisions become easier.Click To TweetReason #2: Setting Financial Goals Dictates How Much You Need To Save
Another reason why it is important to set financial goals is that it dictates how much you need to start saving to achieve your goal.
How much do you need in savings and investments to realise your financial goals? By setting financial goals you are quantifying your ambitions — putting a number on them.
Whether your target figure is £5,000 or £1,500,000 or more you can then track your progress towards it and adjust what you are doing if you want to speed things up. It makes financial planning much easier.
If you are finding it difficult to save money? You can start saving automatically using money apps that help you save money like Plum. The app is a great way to start saving money without missing it. It very easy to set up and your savings can add up quickly. Click to learn more.
By setting financial goals you are quantifying your ambitions — putting a number on them.Click To TweetReason #3: Different Financial Goals Require Different Strategies
Your financial goals will dictate the strategies you need to use in order to achieve them. If your financial goals are quite modest, it might be enough to save a bit extra each month.
But if you have greater ambitions — buying a house, retiring early, taking a year off work to travel — you might need to combine a number of strategies to increase your income, cut expenditure, and invest your savings in stocks or shares to grow your money so you can achieve your money goals quicker.
When you’ve decided your financial goals, you can then work out the strategies which are right for you.
Related: How to Set Powerful Goals You Can Achieve
Reason #4: It Helps Shape Your Career Choices
Setting financial goals might well shape your decision making when it comes to your career.
If your goals are ambitious, you will have to think seriously about how much time you can afford to take off, what you need to do to get a promotion or salary increase, etc.
Realising some financial goals might require you to abandon the security of a 9 to 5 entirely and start your own business, which though risky can in the long term be more lucrative.
When you know what your financial goals are, your career planning and your financial planning can complement each other.
Reason #5: Setting Financial Goals Helps You Stay Focused
Another immense reason why it is important to set financial goals is that it helps setting financial goals helps you stay focused.
Setting financial goals will help you keep your mind on the prize. It’s well worth taking a picture of one or more of your goals — be it a house or a car, or a job you can do from the beach — and sticking it up on the wall by your desk.
This will help you stick to your guns when you’re tempted to splurge on something you don’t need, and remind you why you’re working extra hours.
In this case, the end will justify the means, and that will help you stay on track.
Reason #6: You Can Find the Right Tools to Help
There are thousands of different tools available which can help you save, earn more and invest your money. Many of these are available for free on the App Store or Google Play, but others require a subscription or incur a download fee.
You can use the Wealthify app, for example, to start investing with as little as a £1, save automatically with Plum or track your money with Cleo.
Setting financial goals will enable you to critically evaluate which tools can help you on your way so you can buy only those which are most useful to you.
There’s no point in wasting money on unnecessary products; save your cash for what will help you most.
Reason #7: Setting Financial Goals Creates a Sense of Achievement
Realising your financial goals can be a long and drawn out process. But setting financial goals is the very first step, and it takes both thought and discipline.
Writing them out is in itself an achievement, so when you’ve done it you are justified in congratulating yourself.
Reward yourself with a pat on the back for starting out on your new financial journey and having already surmounted the first hurdle. Setting your financial goals is the first step to realising them.
Setting your financial goals is the first step to realising them. Click To TweetYou don’t have to do it alone: in fact, those who ask for support are far more likely to achieve their aims.
Who can you ask to help you in your financial journey? Check out our handy guide on how your friends and family can help you reach your financial goals to learn how working together makes achieving your financial goals easier.
Over to You
Do you have a financial goal? Write out a plan to help you get there. We’d love to hear from you in the comments below.
If you need a plan to accomplish your money goals, The Money Nuggets Financial Success Planner will help you set clear and specific goals you can actually achieve.
The financial success planner will help you figure out what you really want to achieve with your money, create your financial vision, define your long-term goals, break your big goals into monthly and weekly goals so you can incorporate them into your daily activities. Click here to check it out.
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I think number 5 (staying focused) is critical. It’s not that hard to come up with a list of goals. That takes an afternoon. The hard part is having the daily discipline to work towards that goal, day in, day out. But like you say, there are many tools and apps that can make this easier, like automatic investment services.
Thanks Miguel. There great tools and resources available to help us stay committed and focused on our goals. The first step is to set our financial goals which make it easier to find the right tools.
If I’m honest I don’t set any financial goes, but I do look after my money. I like the idea of setting a goal and that feeling so positive when you achieve it 🙂
Hi Helen, thank you for taking the time to leave your comments. I am very pleased to hear you are on top of your finances. Setting financial goals will help you focus on our short-term and long-terms goals so you can secure your financial future and build wealth.
When I finished university I set a financial go to be debt free within 2 years after university. I was strict with myself and I managed it, now with new car, house and back for grad school I need to set the goals again and this post is a great reminder for me
Funnily enough, my Husband and I have just put a date in our diary to sort out our finances, without distractions, when we are both free. I will add some of these ideas to our discussions!
I definitely need to work on every of these. I am nof so good with managing money. I didn’t know about the tools, will look them up 🙂
Great article, I am a firm believer that to achieve any goals you have to have a plan. No plan, no goals – stay stuck. # 7 builds confidence and empowerment, and creates an environment for future success.