Setting financial goals involves clearly defining short-term, intermediate, and long-term goals. The idea of setting a financial goal is an essential step towards ensuring financial security. On the other hand, a lack of financial goals may lead to spending unnecessarily and lacking funds when they are needed. As such, it is important to set financial goals, which should be specific, measurable, attainable, realistic and time-bound (SMART). I must set SMART long-term and short-term goals and evaluate them to determine their effectiveness to improve my dire financial situation so that by the time I am 65 years old, I will be well-secured financially.
Short-Term Goals
While short-term goals take little time, such as one year, to achieve, I believe that they will offer me a foundation, confidence, and enough knowledge to achieve the long-term financial goals. Sticking to short term-goals and achieving them leads to reaching the long-term goals. To start with, I have to draw a one-year budget based on simple mathematics to establish the cost of my basic needs. For example, if I assign $1 for a break first, $1.5 for lunch, and $2.5 for supper, I will spend $5 per day on meals. Since it is important to account for unforeseen circumstances, if I set aside $0.5 for miscellaneous usage, the total daily expenditure becomes $5.5 per day, which would translate to $38.5 per week and $165 per month. The described simple mathematics would make it easy for me to check if I am moving towards realizing the controlling expenditure goal.
I will then work to clear all my outstanding credit card debts since loans have an ever-increasing interest which may end up consuming my money upon delayed payment. Since my basic salary is $400, I believe that clearing all my debts within two years is quite achievable. If I can avoid spending money on items for which I have not budgeted, believe I can save at least $50 per month to attain the mentioned goal. To monitor my progress with this goal, I will be dividing the total amount saved for this goal with total number of months elapsed. If I am in the right track, the answer to this sum will be $50. Being free from debts would enable me to focus on other goals in life.
I also plan to start an emergency fund project, which will help me cater for my family’s needs during times of hardships. For example, if I happen to lose my job, my family can live on the savings while I seek another job. That way, I will not have to borrow money that I may further complicate my financial status. I will open a savings account and set an automatic money transfer of $25 per month from my salary account to this account to achieve the mentioned goal. Indeed, the automated method will ensure that I remain committed to saving to save money for family emergencies.
Intermediate Financial Goals
In this level, I will set goals that will take around two to ten years to achieve to enable me to tackle medium-weight challenges and start projects that will help me achieve future dreams. It is at this point that I will enrol in insurance. During this time, I will be about 45 years old thus it is likely that I will have family. Therefore, I will take a life insurance cover to take care of my family in case I pass away prematurely. I will take disability income insurance cover. That way, I will have a salary even in case of injuries and illnesses that may prevent me from working.
I will also clear all my student loans and then divert my attention to other financial goals. These loans take up a significant portion of my monthly budget hence I cannot plan for some things if I do not clear the debts. If I achieve the short-term goal of limiting my expenditure to necessities, then I will spare some money for repaying the debts within about two years.
Long-Term Financial goals
At stage, my goals here will be about future preparation. It will be time to define my future, my dream. I have a family and a home but I am not happy with our current home. As such, I will set aside some money to upgrade it. I will save about 10% of salary for fifteen years to ensure this is in effect. I will also plan to buy a private car for my family worth $10 000. I think I will need 12 years to save enough money to buy the car. I will be saving $70 per month for twelve years. I evaluate the success of this goal monthly by multiplying the number of months by 70 and confirming if they coincide with the target. I also need to save enough money to sustain my needs on retirement. I will save 15% of my salary every month so that by the time I retire the age of 65 years, I will have accumulated enough money. I will also increase my retirement savings by enrolling in Employer-sponsored retirement plans by contributing enough amount of money to earn my full employer match.
Through this essay, it is, therefore, very important to set smart financial goals. This is because achievable financial goals will help me to be independent and be able to rely on myself for what I need and not having to worry much about various risks in life. At this time thus, I will be ready to retire. My financial status will be well sorted out because I will have cleared all the debts and loans. I will also have insured for my family and life. Additionally, I will have saved enough for money to sustain for my family needs after retirement.