What Goals Should Be Considered in Financial Planning?
- B. Jenkins
- Aug 29, 2023
- 2 min read
Updated: Aug 21, 2024
So, we recently covered the concept of goal setting in a financial planning context. However, that was meant more as an introduction to the actual process of goal setting. It didn’t really describe what kind of goals are useful to think about when starting your financial advising journey. While you’re likely reading this because you’ve already got an idea of what you want, it helps to consider that there are a myriad of things you can achieve with the appropriate planning. That’s what this post is about.
Understanding Financial Goals
Financial goals are specific targets or objectives that you set for yourself in order to achieve certain financial milestones. These goals help you create a roadmap for your financial journey, guiding your decisions, actions, and priorities. Financial goals can range from short-term needs to long-term aspirations, and they often play a crucial role in achieving financial security, growth, and success.
Types of Financial Goals Worth Considering
Financial goals can be broadly categorized into short-term, medium-term, and long-term goals. Here's a breakdown of each category along with examples:
Short-Term Goals (0-2 years)
These are goals that you aim to achieve within a relatively short time frame. They often involve managing immediate financial needs or addressing smaller aspirations. Examples include:
Building an emergency fund to cover unexpected expenses.
Paying off credit card debt or high-interest loans.
Saving for a vacation or a special event.
Purchasing a specific item, like a gadget or furniture.
Medium-Term Goals (2-5 years)
Medium-term goals usually require more planning and saving than short-term goals. They involve achieving milestones that are a bit further down the road. Examples include:
Saving for a down payment on a home.
Funding a child's education.
Buying a new car.
Starting a business or a side venture.
Long-Term Goals (5+ years)
Long-term goals involve substantial planning, disciplined saving, and potentially investing. These goals often have a significant impact on your financial well-being and future. Examples include:
Building a substantial retirement nest egg.
Paying off your mortgage and becoming debt-free.
Achieving financial independence and early retirement.
Leaving a legacy for your heirs or supporting charitable causes.
Factors to Consider When Setting Financial Goals
When setting financial goals, it's important to consider the below factors:
Specificity
Make your goals clear and well-defined. Instead of saying "save money," specify how much you want to save and by when.
Realistic
Set achievable goals that align with your current financial situation and resources.
Time Frame
Determine when you want to achieve each goal – short, medium, or long term.
Priority
Prioritize your goals based on their importance and urgency.
Measurable
Create goals that you can track and measure your progress toward.
Flexibility
Be open to adjusting your goals as circumstances change.
Financial Planning
Plan how you'll achieve each goal, including budgeting, saving, and investing strategies.
Final Thoughts
Remember that financial goals are personal, and they should reflect your values, aspirations, and current life stage. Regularly reviewing and adjusting your goals as your situation evolves is a crucial part of successful financial planning. If you're uncertain about setting or achieving your financial goals, consider seeking guidance from a certified financial advisor to tailor a plan that best suits your individual circumstances.
*Not financial/legal advice
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