Ask most people about their financial goals and you will usually receive the same vague responses; to get rich, to earn more money, to amass plenty of savings and so on.
All is well and good, but not nearly defined enough to constitute viable goals.
Setting financial goals is essential to ensure a safe and secure financial future. Short-term, your financial goals could include things like paying off your credit card debts, investing in your future with property bonds or similar investment funds, saving the money you need for a specific home improvement or building an emergency fund for a rainy day. Longer-term, you could be aiming to pay off your mortgage, put a specific amount aside for your pension and so on.
As for why it is important to define your objectives, setting financial goals can be advantageous in the following ways:
- It gives you something to aim for
Setting financial goals is a little like setting the destination for a journey; unless you have a destination, you cannot realistically expect to ever get there. Rather than striving for something vague and ambiguous, setting goals gives you something concrete to aim for and work towards.
- You know how much you need to save
With specific financial goals in place, you will also know exactly how much you need to set aside each month. You will no longer need to approach your savings randomly, or worry you may be allocating too much or too little to your savings. By knowing how much you need to save, you also find out how much you can comfortably spend.
- It may need to be factored into your career choices
The financial goals you set could have a major impact on your immediate and long term career choices; it could be that the most you will ever earn from your current 9 to 5 will not get you anywhere near your goals. In which case, it may be necessary to seek new employment, or take the plunge and go into business for yourself.
- You can set smaller goals to achieve along the way
Once you have defined financial goals in place, you can expand on them to create smaller goals. For example, if you plan on putting aside £10,000 within the next three years, you could set 10 short-term targets of £1,000 each and reward yourself appropriately for achieving them.
- It makes expert financial advice easier to obtain
Often, consulting with an independent finance broker or financial adviser can hold the key to making better financial decisions. This is only the case if you can give a clear indication of what you intend to achieve and when. At which point, they can provide independent expert advice on things like savings, investments and other ways to put your money to work.
- It gives you a real sense of achievement
The psychological benefits of having something concrete and relevant to work towards are also worth considering. Rather than spending your days and nights worried about your financial future, you set yourself on the path towards success.
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