What are the best ways to set financial goals?

What are the best ways to set financial goals?

Table of Contents

Own home, new carspecial trip private pension, debt settlement, among so many other dreams and socioeconomic needs, how do you define your financial priorities?

If you don't have a clear answer to that question, or even know where to start this type of investment, this post is for you!

Learning ways to set financial goals is the smartest way to start this process. In this post, we will explore these practices through a few specific points:

  • what are financial goals;
  • what are short, medium and long term goals;
  • the importance of financial goals;
  • step by step to define financial goals;
  • the most common examples of financial goals.

If you want to go deeper and see some tips on how to save money for old age, we recommend reading this other article here.

To find out the best ways to set financial goals, keep following this post. We prepare a detailed step-by-step on how to set goals and organize the achievement of your goals. financial objectives. Good reading!

What are financial goals?

Controlling financial life is a common challenge. After all, in addition to ensuring the timely payment of all accounts (expenses and expenses), it is important to set aside a portion of your monthly income to invest in specific dreams and goals. That is precisely where the financial goals come in.

They function as minor steps of the larger objective, which guide strategic decision-making, optimize the control of general expenses and, consequently, facilitate the achievement of such financial purposes.

For that, these goals consider characteristics such as the individual's income, the turnover of his capital, your personal goals, market conditions, personal financial situation, and so on.

The ways of setting financial goals vary according to the objective, however it is worth pointing out that they must be quantitative so that a measurement of efficiency and effectiveness can be made possible whenever necessary. And so, the process of conquest is always qualified.

What are short, medium and long term goals?

Before exploring ways to set financial goals, you need to know that there are three basic types of goals: short, medium and long term.

Every monetary objective must have a pre-stipulated deadline. This is because without a deadline to reach it, it is very easy to postpone it and end up prioritizing others investments that can delay its realization.

In other words, without a planning this financial goal is unlikely to be met, and frustration may become a reality.

To ensure strategic value for your schedule, understand the fundamental concepts of the following three types of goals.

Short-term goals

Short-term goals should be achieved within a few months at most. Therefore, they involve more urgent and immediate objectives.

Following a simple logic, the priority should be to pay off debts, especially those with higher interest rates, such as credit cards and overdraft. Then, activities that require less purchase value can be considered.

Some examples of objectives with short-term goals are: carrying out minor renovations to the home or commercial establishments, starting an emergency reserve, starting a monthly investment in financial market, among others.

Medium term goals

The medium-term goals encompass relatively larger objectives, which require more significant investments to be achieved.

Any goods or services that can be acquired in a period of a maximum of 3 years are considered medium term.

Some examples of goals with medium-term goals are: taking an international trip, organizing a wedding party, changing cars, passing the entrance exam, paying for a prom, and so on.

Long-term goals

Long-term goals they involve bigger plans, with high acquisition value and that demand a much more rigorous and detailed planning. In terms of time, each project can have an individual demand.

Joint collaboration by family members is necessary to achieve this goal in less time. This is because in addition to the final investment value being high, the monthly installments are also usually relevant.

Some examples of objectives with long-term goals are: to buy your own home, to start living dividends, start a private pension plan, pay for higher education, among others.

It is worth noting that the distance between the dream and its fulfillment may not be related only to the lack of money, but to the absence of adequate planning. Therefore, clearly defining deadlines is indispensable for any ways of setting financial goals.

What is the importance of financial goals?

Who has never made promises at the turn of the year, but has done nothing to fulfill them? This failure condition, possibly, happens because these vows are quite vague and a careful planning was not created. That is, they have not left the imaginary plane.

By analogy, the same goes for financial goals. Goals are optimizers that guide the planning of this achievement, placing the objective in the action plan.

In addition, they directly impact the individual's motivation. This is because when the objective is divided into smaller steps, it is easier to stay stimulated and see that it is, yes, possible to achieve. What's more, if the goal is challenging, the satisfaction of accomplishing a difficult task is unquestionable.

However, the opposite also deserves attention. When setting a goal and failing to achieve it, discouragement is a fact and can compromise the progress of the entire process.

Therefore, having clear, realistic and specific financial goals is important because it brings the objective closer to reality and influences the mood of the entire operational process.

What are the ways to set financial goals?

Now that you understand what short, medium and long-term goals are and how important they are to achieving specific goals, let's address the ways to set financial goals.

To help you, we have prepared a complete step by step! Thus, it is possible to ensure that all stages of the process are being carried out without errors, so that your objective is more easily achieved. Check out!

Step 1: Determine the financial objective

The first step is to define your financial objective, that is, what you want to achieve and the prediction of when it should happen. For example, taking an international trip for next year's vacation.

That done, the next step is to consider ways to set your own financial goals.

Step 2: Set the financial goals

As we have seen, these financial goals are minor tasks that help to achieve the goal outlined in the previous step.

Considering the same example, the goals can be: to separate a specific percentage of the fixed monthly income, to add a certain amount to make the payment in cash of the tickets and avoid the collection of fees, add a specific amount for general expenses during the trip, reserve the amount of the passport issue, and so on.

The ways of setting financial goals are diverse, but it is important that they are strategically defined to facilitate the final conquest. Check out a tip below.

Tip: Keep in mind the SMART method

One of the best ways to set financial goals is to use the SMART method. This technique allows to analyze the compatibility of a goal with the reality of the individual, so it is essential to validate financial objectives.

The method considers the following characteristics:

  • S: Specific (specific)
  • M: Measurable (measurable)
  • THE: Achievable (reachable)
  • R: Relevant (relevant)
  • T: Time Based (linked to a term)

With that in mind, goals can be chosen with the most important purposes and impacts for the ultimate goal.

Step 3: Be realistic

The next step is to avoid setting goals that are outside of your reality or that compromise your income too much. When it comes to financial life, the security of the present moment must also be taken seriously.

In addition, as we said, these choices can influence your motivation during the process both positively and negatively. So it is essential to be realistic when choosing one of the ways to set financial goals. If necessary, review the previous step.

Step 4: Identify steps and set deadlines

As we have seen, setting deadlines is indispensable for any ways of setting financial goals. Identifying whether they are short, medium or long term allows the stages of execution to be thought of more safely and accurately. Therefore, this step is essential.

It is worth remembering that factors such as the market fluctuation and other limitations must be considered to stipulate the period of execution of a goal.

Step 5: Organize the planning

With quality financial goals, which are realistic and directly assist in the achievement of the general objective, defined, it is time to organize the planning of the process.

Choose to use a spreadsheet that can be easily consulted and updated, so the control guarantee is optimized and its performance can be evaluated.

Step 6: Track project performance

Finally, the last step is to review the ways to define financial goals employed in the process. That it is important because unforeseen events happen and adjustments may be necessary.

For example, the arrival of a son you can postpone the trip abroad or include an extra ticket.

This review is also critical to maintaining an honest relationship with your financial goals – without loosening them out of sheer convenience or abandoning them due to negligence.

What are the most common examples of financial goals?

Another one of the many ways to set financial goals is to know the investment possibilities you have. We have prepared a list with some examples that can help you in this decision, check below.

Debt settlement

Before thinking about ways to set financial goals, it is necessary to consider the individual's real condition of life. If there are debts for example, they must be prioritized. This is because the payment of interest harms the financial health and makes it difficult to win new investments.

To enhance the achievement of this short-term goal, it will be necessary to cut expenses, start extra work to increase income, save a percentage of monthly income to honor the payment, negotiate the debt and get lower interest rates, among others.

Emergency reserve creation

The second example of investment that we are going to explore is the emergency reserve, which is a financial asset created for unforeseen events such as medical expenses, unemployment, among others. This fund must cover living costs (individual or family) for a period of 6 to 12 months.

In order to optimize the achievement of this short-term goal, in addition to saving money monthly, it is interesting to research the options for applying the market, considering mainly liquidity and yield.

Buying a property

Another example of investment is the purchase of your own property. Of the ways to set financial goals, this can be one of the most challenging as it involves relevant time and value.

In order to strengthen the achievement of this long-term goal, it will be necessary to collect the money from the entrance, financing, minimize the part of the income committed to installments, count on investments that present good yields, among others.

The quality of these financial goals must be measured in an objective way, so it is possible to know exactly how is your progress and, especially, if it is consistent with the established deadlines. This goes for any type of financial objective.

So, following the guidelines presented in this post, you have all the information you need to work out ways to set financial goals and start your journey with primacy. Achieving your most desired financial goals can and must start now!

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