Setting financial goals will give you a direction in your personal finances. The goals you set for yourself, according to Sabrina Hamilton, the founder, and creator of the personal finance website Finance Over Fifty, are like milestones on your journey to financial freedom. They guide the steps you need to take in between each one and inform the daily financial decisions you must make in order to be successful. She further reinforces that without having clear financial goals, your dream of financial freedom is just a wish.
Now that we’ve established the value of having and/or setting financial goals, let’s discuss other reasons why it’s important to put a premium on them. For that, we’ve interviewed some of our friends from various industries to know more about their way of thinking—as well as some advice—on the aforementioned subject. Here are their thoughts:
To Give More Meaning to Life, To Have More Options, and To Provide Peace of Mind
It’s really more about setting life goals. Financial goals will glow from those; and by looking at it this way, become easier to reach. This means, before setting specific financial objectives or dealing with budgets, investments, or other figures, set and write down goals for your life—and if you’re in a relationship and/or have a family, do it with your spouse and family.
Goals could range from planning for a post-COVID trip to retirement at a certain age to making sure you have time to train for a marathon. Write them all down, and then build a budget around the goals. You may need to modify goals and priorities (maybe buying a house comes before the trip to China, or the trip to China becomes a visit to Chinatown in San Francisco).
Also, setting financial goals is about providing options for yourself. Young adults, especially, may find it hard to relate to saving for retirement and setting financially related retirement goals. But it’s really about creating the ability for options—options to do what they want when they want.
Lastly, setting financial goals can provide peace of mind. Rather than wondering what tomorrow may bring, setting and working toward goals provides direction, structure and the lack of stress that comes with planning. Since one key financial goal is (and should be) to create an adequate emergency fund, the knowledge that you can pay for the inevitable unexpected expense brings tremendous peace of mind.
– Sean Fox, President, Freedom Debt Relief
To Build a Positive Habit
In my career as a CFP, I worked with so many people whose lives were transformed by setting financial goals. They don’t even have to be large goals, working towards something small in incremental steps builds the confidence and the know-how to go bigger and better as you hit goal after goal.
I think the main reason it makes sense to have and set financial goals is because it establishes a habit. Many people refuse to set goals because they believe they are incapable of meeting them. However, hitting that first objective—whether it’s paying off credit card debt, or finding a way to squirrel away an extra couple hundred dollars a month—is such a good feeling that people want to continue.
I’ve seen it first-hand so many times. Getting into the habit of setting and working towards financial goals is essentially working towards improved peace of mind. Financial stress hurts and setting and reaching goals, big and small, is the antidote.
– Thomas Chambers, Head of Marketing and Business Development, The Stock Dork
To Push You to Keep Moving in the Right Direction
Having goals is important because they act as inspiration. They lead you down the path to figuring out how to achieve what you want for your future. But—as what many of us say—having a goal without a plan is just a wish. Actively working on reaching your goals is how you learn and progress.
For example, when it comes to financial goals, creating a comprehensive financial plan helps you to assess your current and future financial health, to understand what’s possible, how long it might take, and specifically what you can do to affect the outcome. It acts as a roadmap to becoming financially secure and enables you to track your progress. A goal will always keep you moving forward but having a plan to reach that goal will ensure that you are going in the right direction.
– Drew Parker, Creator, The Complete Retirement Planner
To Prepare You for Unexpected Financial Events
It’s essential to set financial goals as you need finances to survive and to plan for an economic crisis. If you set financial goals, your mind will work like a heat seeking missile adjusting to reach your goals and you will have a sense of security. In addition, it will allow you the freedom to help you purchase things you want without feeling guilty or worrying about the financial implications.