Financial Goals: Meaning and Examples

Among all the other objectives in life, financial goals are necessary to manage your financial status while saving and investing. Financial goals are the capital targets you create for yourself or your family, helping to achieve economic success.

Your financial goals can be short-term, medium-term, and long-term, as per your preferences. In the short term, you create capital goals for small spending, such as buying furniture or electronics. Whereas, you can save money for the long term if you wish to buy a house or a car.

Understanding Financial Goals

If you are wondering what are financial goals, they are nothing but the financial targets that you set for yourself. 

In fact, you may have set financial goals all the time without even realising it. These goals can either be short-term, mid-term, or long-term. In any case, it is necessary that they have a fixed time frame.

Secondly, financial goals need not always be earning, saving, or investment goals. As a matter of fact, they can also be about spending as well. For instance, setting financial goals for yourself where you try to restrict your spending to just 20% of your total earnings is a good example.

Types of Financial Goals

Since financial goals are usually categorised according to the time, there are three major types - short-term, mid-term, and long-term. Let’s take a look at these three types of financial goals in detail.

• Short-Term Financial Goals

Financial targets with a time frame of less than a year are typically known as short-term financial goals. Saving up for a new television is a good example of a short-term goal since it can usually be achieved within a year, if not a few months.

• Mid-Term Financial Goals

Mid-term financial targets are ones for which you may need more than a year but less than 5 years. Achieving mid-term goals is usually harder than short-term due to the quantum of money involved. However, with a little hard work and discipline, they’re easy to attain.

• Long-Term Financial Goals

Lastly, financial targets with a time frame of more than 5-10 years are categorised as long-term financial goals. These are the hardest to achieve and require immense financial discipline. Saving up for a child’s higher education is a good example of a long-term goal.

Examples of Financial Goals

Here are some common examples of financial goals that people have.

• Creation of an Emergency Fund

An emergency fund is really crucial. It can help you stay ahead of the curve by keeping you prepared for any kind of situation that arises in your life.

An ideal emergency fund should have 9 to 12 months’ worth of your annual income. This way, you can tide over your emergency requirements easily without much of a hassle.

• Saving up for Retirement

The retirement phase is a very important part of your life. Saving for retirement is a long-term financial milestone that needs financial discipline and can take years. The earlier you start, the better, as you get a major head start, which can make this undertaking a lot easier.

• Clearing Off Debt

Debt, when not paid on time, can weigh down your finances. In case there is an unexpected delay in your debt repayment, a little goal-based financial planning can help you get back on track.

• Saving Up for a Family Vacation

Not all financial goals have to be centred around being financially responsible. You can even have a financial goal where you save up for a fun activity like a family vacation.

And since family vacations require large sums of money, often running up to lakhs of rupees, you can set a target and start saving up towards it.

• Paying Off Student Loans

The cost of education, and not just higher education, has increased over the last few years. While saving up for higher education is one of the financial goals an individual can have, it may not be feasible for everyone. Here, opting for a student loan can be the ideal solution.

However, like any credit, the student loans need to be paid off within the agreed tenure. Thankfully, student loan offers allow students to repay loans either after the course starts or after their education ends.

Regardless of when the repayment starts, it is one of the most common mid-term as well as long-term financial goals for people everywhere. This is because clearing student loans can help them enter their adulthood without any debt.

• Paying Off Credit Cards

The use of credit cards has increased in the past few years, but it requires financial responsibility from your end. This is because if you regularly fail to pay your credit card dues, in the long run, it can be detrimental to your financial wellness.

This is why it is a common practice to have credit card bill payments as one of the mid or short-term financial goals. By accounting for your credit card payment in the short term, you can secure your financial future naturally.

• Buying a House

Buying a house for investment or for fulfilling a dream, is among the most common financial goals that many in the country and across the globe share.

Whether you get financing or save up for it, planning for the long term is crucial in this case. As such, including it is one of the common long-term financial goals that many aspire to accomplish.

• Starting a Business

Running a successful business means securing a hefty corpus for any and all needs. Whether it is for working capital or business expenses, the funds are acquired after wealth accumulation over a period of time.

Moreover, many people across generations have aspirations to become an entrepreneur. To accomplish this aspiration, building the corpus to get started is a worthwhile goal to set. In fact, it’ll surely make the process of starting a business a lot easier.

• Feeling Financially Secure

Becoming financially safe is important to spend without concern of overspending or lack of capital. Financial freedom can be a long-term objective for many people.

Feeling financially sheltered means that you do not depend on any other source of income. This way, you do not need to worry about addressing any unforeseen expenses, such as medical bills.

• Upgrading/Buying a New Car

Upgrading or purchasing a new car might be expensive, and you need to plan to do it ahead. You must start saving early with effective planning. Buying or replacing a new car requires access to larger funds and it can be fulfilled using a loan also.

If you have planned it already, you can determine the tenure for your monthly instalments and move ahead accordingly.

• Finding a Higher-Paying Job

As you grow in your career, it is necessary to find a high-salary job. This can require you to boost your education or skills to equip yourself with the market’s requirements. To achieve this goal, it is necessary to gather funds in advance.

You can also get a study loan or advance your wages from your employer for any short-term courses.

How to Prioritise Your Financial Goals for Smart Investing

To prioritise your financial goals, here are some tips you can follow to ensure smart investment and decision-making.

• Create a Budget

The first step to start investing and saving is to create a budget. Creating a budget would enable you to split your monthly expenses and check how much money you are left with. Setting aside the emergency fund, you can decide how much to invest in.

• Assess Your Financial Goals

The next step is to understand your future financial goals. It is necessary to understand what you want to save for. Let it be a car or a house, you need to prioritise them.

• Categorise Your Goals

After you decide your financial goals, you must then determine each of the goals into a category. These categories a be short-term, long-term and medium-term financial goals.

• Set Up a Separate Savings Account

To deposit your savings, you can create a separate savings account where you only add money as a part of your savings.

• Invest as per Your Risk Tolerance

As per your risk appetite and understanding, you must start investing smartly in different types of policies and plans.

• Track Your Progress Regularly

After you start investing, you must track your progress regularly. This helps you determine if your goals will be fulfilled in the defined time period.

Importance of Financial Goals

Now that you know what financial goals are, let’s take a look at how important they can be.

• They Can Help You Understand Money Better

Setting financial goals can change how you look at finance and money as a whole. It can help you understand how investing small sums periodically can add up over time.

• They Can Improve Your Financial Situation

Setting financial goals can also improve your finances significantly. And they make it easier for you to achieve the major milestones in life.

• They Can Influence Your Actions Positively

Setting financial goals will also help you adopt a more disciplined approach to saving and investments over time.

Characteristics of Financial Goals

Effective financial goals have certain distinct characteristics that make them stand out. These characteristics can be represented with the acronym ‘SMART’. Each letter in it stands for– Specific, Measurable, Attainable, Relevant, and Time-bound. Here’s a quick look at what these characteristics entail.

• Specific

In order to be a proper financial goal, it must first be specific. For instance, wanting to save up ₹50,000 by the end of 6 months from today is a good example of a specific financial goal.

• Measurable

Financial goals must be quantifiable in nature. Whether it is to save up a particular amount of money or repay a debt obligation that you have, financial goals should always be measurable.

• Attainable

Another major characteristic of a good financial goal is attainability. A financial goal that is realistic and attainable can not only motivate you in a better manner but also save you from disappointment.

• Relevant

Financial goals must be relevant to your life. Only when they are relevant will you want to work hard towards achieving the goal. If it is not relevant to you or your loved ones, the possibility of you giving up on them midway is higher.

• Time-bound

Financial goals must also have a finite time frame associated with it. Financial goals that have no specific time frame for completion are harder to follow up. Setting a time for your goals can help prevent procrastination and can bring financial discipline.

Tips for Setting and Achieving Financial Goals

Many individuals think that setting a financial goal is tedious, but financial goals are more useful and easier to understand. However, that’s simply not true. In fact, all that you need to do is follow the tips outlined below.

• Know What You Need the Money For

To set a proper financial goal, you would need to first determine what you’re going to use the money for. Giving your goals a purpose is the first step, as it makes them more meaningful and pushes you towards achieving them.

• Assign a Target Date

The next step is to assign a target date. It can be anything from a few months to a few years. Giving your goal a time frame allows you to plan your finances and take relevant actions. It also makes it easy for you to categorise them into short-, mid-, or long-term goals.

• Set a Priority to Your Goal

If you have multiple goals, which most individuals tend to have, setting a priority for each one can help make managing them easier.

Set a high priority for goals that affect your standard of living, such as saving up for your retirement or your child’s education. Goals that are not immediate needs and have no immediate impact have a lower priority.

• Create a Budget

Creating a budget involves combining account information and labelling each in a category. Creating a budget can involve analysis of your bank statements and transaction bills. After understanding fixed expenses and eliminating unnecessary ones, you can create a budget for your investments.

• Record Your Spending

To understand necessary and unnecessary expenditures, you must start recording your expenses. This will overall help you understand where you lag in your financial goals strategy. By recording your spending and evaluating your bills you can record your capital spend monthly.

In future, if you lose track of your spending, this record will help you in better evaluation.

• Anticipate Future Bills

A prime step in creating a financial goal is to forecast your future expenses. Before starting to invest, you must decide on a future goal. This goal can be for a short term or a long term, and according to it, you must assess your capital need.

By anticipating your future bills, you can know how much you need to save for your future needs.

• Constantly Revisit Your Goals

It is important to constantly revise your goals at least once a year. Adjusting is important because your budget can change, and you might provide extra funds into your investment scheme.

And, also the item you wish to buy may get a price hike. So, you must revise your goals and implement your saving plan accordingly.

Financial Goals Help Investment Success

Financial goals are important to help your investment become a financial success. When you prioritise and start saving from unnecessary expenses, you increase your investment with time. And so, it is necessary to keep revising your goals accordingly.

When you decide on a financial goal, it helps you start investing smaller. When you look at your financial goals every time, you feel the need to start saving a little timely. These small savings gather around and create a big fund for your long-term financial goal with time.

This not only helps in making your investment a successful plan, but also helps you achieve your long-term financial goals easily.

Conclusion

Now that you know all about financial goals, go ahead and start setting some for yourself if you haven’t already. Setting goals and achieving them can improve your financial health and can improve your overall life in the process.

If you need funds to meet any planned or unforeseen expenses, you can get a personal loan from Bajaj Markets. Through this platform, comparing offerings and applying for a loan is 100% digital and convenient.