It takes strategic planning and proper goal setting to keep your finances in shape. Being able to identify the right financial goals is essential to attain financial security. We spoke with the experts who shared the most important long-term and short-term financial goals that everyone should prioritize to achieve a financially healthy lifestyle.
Below are the top 25 financial goals from the pros:
1. Think About Retirement Planning as Early as Possible
Drew Parker, Creator, The Complete Retirement Planner
Understand that it’s never too early to start thinking about retirement planning (if this seems premature, rename it “personal financial planning”). The critical elements of this are to develop good habits for long-term saving and to gain a solid grasp of how your current decisions directly affect your ability to achieve financial success in the future. You may not be able to predict the future, but you can certainly prepare for it, and the more prepared you are, the more control you will have over the outcome.
2. Obtain & Maintain Good Credit
Harrine Freeman, Financial Expert & Owner, H.E. Freeman Enterprises, LLC
Credit is a critical component of your financial plan. Credit gives you more options and more choices when spending money. Credit is used to determine a person’s trustworthiness in several industries, such as employers, insurance companies, auto companies, and service providers, such as utility and cable companies. Once you have poor credit, it can take years to recover. It is expensive to have poor credit. The most effective ways to increase your credit scores are to obtain a copy of your credit reports once a year and dispute any errors. Next, keep credit card balances at 20 percent or less of the credit limit and avoid opening several new accounts within a twelve-month period. This shows creditors that you are responsible with your spending and can effectively manage using credit. This also helps to boost your credit score so you can achieve and maintain good credit.
3. Aim for Self-Preservation
Theophilus Griffin, Co-Founder & President, Manumit Group
Your most important financial goal is self-preservation. A good way to think about self-preservation is to ask yourself, “If my income was cut off tomorrow, how long can I survive?” Therefore, emergency savings should always be your first priority; it is what will save you in tumultuous financial times. After you have established your emergency savings, your next priority is to eliminate your debt as quickly as possible. Debt is the enemy of financial freedom, because it handicaps the ability to build wealth. Once debts have been minimized, saving and building wealth should be the top priorities. At times, financial priorities may realign; however, financial solvency should always be the focus.
4. Live Within Your Means
Kevin Gallegos, Vice President of Phoenix Operations, Freedom Debt Relief
It’s important to live within, or better yet, below your means. Know exactly what you have to spend each month and spend less. Living beneath your means goes further than living within your means. It means taking responsibility and choosing where your money goes, instead of being influenced by whims, advertising, habits, or peer pressure. If you can’t pay for it now, or in full at the end of every month, don’t buy it and don’t charge it.
5. Build an Emergency Fund
Jennifer McDermott, Consumer Advocate, Finder
The first financial priority of anyone should be building up emergency savings. This is a safety net for life’s unexpected events. While it may seem counterproductive to have savings sitting dormant while there are debts to pay down, a lack of emergency savings can have a devastating impact during unexpected situations. Work towards saving at least three months’ worth of fixed expenses.
6. Aim to Get Out of Debt
Doug Keller, Community Manager & Personal Finance Expert, Payless Power
Debt is something that can limit our financial capabilities while demanding regular payments that reduce our disposable income. There are such things as “good debt” and “bad debt,” but all debt needs to be paid off eventually. In addition, because the effects of being in debt can be far reaching and carry some significant implications, it is important to get out of it. For those with credit card debt, the best way to start reducing the amount owed is to go above and beyond in repayment. Instead of getting by with simple minimum payments, be proactive with it. Minimize your credit card use and always pay what you spend each month. This is similar to student loans, as the more you can allocate to them with each payment, the quicker you’ll be out of debt. It is important to stay on top of your payments and give more when you can so that you can make greater progress in getting out of debt.
7. Put 10%+ of Your Monthly Income in Savings
Stacy Caprio, Blogger, Fiscal Nerd
Prioritize saving at least 10 percent of your income each month to build a savings and retirement net. Building your personal savings will prepare you in case something financially horrible happens. This will also serve as your savings net when you finally decide to retire.
8. Save for Your Children’s Education
Ksenia Yudina, Founder & CEO, U-Nest Holdings LLC
Contrary to the common belief that the most important financial goal for investors is saving for retirement, I would argue that any parent’s most important financial goal is saving for their kids’ education. For any parent, kids should be their number one priority. College tuition inflation is increasing at 6 percent per year (compared to consumer inflation of 2 percent), and usually, the time a child goes to college will arrive sooner than a parent’s retirement. Many parents have an opportunity to save for retirement through their employer-matching 401(k) plans, but employers don’t provide an option to match college savings. Investors may decide to work longer if retirement savings are not sufficient, but college enrollment is predetermined and not flexible. When you invest in your children and raise them as responsible human beings, you have a greater chance that they will help take care of you in retirement.
9. Consider Starting a Business
Lidia Staron, Marketing Communications Specialist, OpenCashAdvance
According to financial experts, you can never really get rich if you do not go into business. A business, when built correctly, is a money-making machine. You need to have an idea of what to sell, so do research about the trendiest products on the market. Furthermore, you need to have the initial capital to set things up. Fortunately, there are a number of financial options to fund your business. If you want a bigger business, you can look into SBA loans or you can even apply for government grants if you are eligible.
10. Pay Off Your Credit Card Debt
James R. Duren, Personal Finance Expert & Credit Card Analyst, HighYa LLC
Getting rid of your credit card debt can free up hundreds of extra dollars every month, and it can help you save money for more important things. While it may seem impossible to get rid of your credit card debt, you can do it by making a budget, sticking to that budget, using your extra money to pay off the debt, and setting a specific deadline for the goal.
11. Evaluate Your Insurance Needs
Christopher Walsh, Associate Wealth Manager, Keystone Financial Partners
Insurance planning is an important financial goal that is often overlooked. Insurance plays a significant role in a properly designed financial plan. It’s important to evaluate your individual needs to make sure you and your family are protected. In many cases, it can be fairly affordable to manage this potential risk and trust me—the peace of mind alone makes it worth reviewing.
12. Take Advantage of Your 401(k) Retirement Plan
Jessica King, Marketing Director, Botkeeper
If your employer offers a match on your 401(k), take advantage of it. It’s essentially free money, so don’t pass it up. If you haven’t started retirement planning and are over the age of 50, you’re eligible to go beyond the normal limits with catch-up contributions (to your 401(k) or Roth IRA) so take advantage of those catch-up contributions to help expand your retirement savings.
13. Save Money to Invest in Real Estate
Adam P. Smith, President, The Colorado Real Estate Finance Group, Inc.
Aim to save enough money to invest in real estate. Real estate is a vehicle that will appreciate at a greater rate than the interest you’d pay to acquire it. There are other benefits in investing in real estate too, such as tax deductions. If you have an investment property, you can use this as a means to earn money even during retirement.
14. Achieve & Maintain a Credit Score of 800
Chelsea Hudson, Personal Finance Expert, TopCashback
Contrary to popular belief, achieving an 800 credit score isn’t unattainable. Anyone who manages their credit properly can reach and maintain a healthy credit score of 800. Having an 800 credit score will allow you to qualify for better interest rates and terms on future loans and credit card inquiries. Not only will you save money in the long term, but you’ll be viewed as creditworthy. To reach and maintain an 800 credit score, aim to utilize less than 30 percent of your credit utilization ratio, never skip a payment, and avoid hard inquiries.
15. Get Enough Investment Income to Cover Your Monthly Expenses
Shawn Breyer, Owner, Breyer Home Buyers
Your financial freedom number is simply the amount of money you need to cover your monthly expenses. You’ll want to sit down and calculate all of your monthly expenses. Let’s say it’s $4,000 per month. This is your monthly recurring income goal. You’ll want to acquire enough assets that generate monthly income that meets or exceeds your expenses. Let’s say you buy rental properties with monthly cash flow of $400 per unit. You know that you need 10 rental units to cover all of your expenses, meaning that you no longer have to work at a W2 job to maintain your lifestyle, allowing you to pursue a job you love or to retire.
16. Create a Realistic Budget
Howard Dvorkin, CPA, Debt Expert & Chairman, Debt.com, LLC
One of the most important financial goals for everyone is to create a realistic budget that works. It doesn’t matter how much you tighten your belt or increase your income. Nothing else matters if you don’t know how much you’re spending and on what. These days, it’s easier than ever to create a budget using online programs such as Mint or Tiller.
17. Aim to Understand Your Current Expenses
Scott Wardell, Financial Planner, Thrivent
It is particularly important to take the time to fill out a personal expense worksheet to understand what your current expenses are and to be extremely honest with yourself on what expenses you need to maintain. Without this exercise, many people say that they’ll be able to live on substantially less than they live on today, but after going through the expense worksheet and asking them what they’re going to eliminate, they have a much more difficult time. It’s best to understand your expenses now so you’ll know how much you need and what your goal should be when you retire.
18. Build a Cash Reserve Equal to at Least 3 Months’ Living Expenses
Emily G. Stroud, President & Owner, Stroud Financial Management, Inc.
Your first saving goal is to build a cash reserve equal to at least three months’ worth of living expenses, to be used in case of emergencies or other unexpected expenses. As soon as you have a cash reserve account funded, start saving for retirement, even if you still have some debt to pay off. The earlier you start saving for retirement, the sooner you will achieve financial freedom.
19. Regularly Review & Revise Your Budget
Alayna Pehrson, Financial Blog Content Manager, BestCompany.com, LLC
Creating a realistic budget is important, especially if you are trying to save money each month. It’s important to revisit and revamp your budget (if necessary) on a monthly or bi-monthly basis. This ensures that your budget will never be outdated and will tell you exactly where your money should be going. Having a reliable budget can really make a difference regarding your personal financial situation.
According to Rule #1 Investing, one of the most important financial goals that we should prioritize is to get our taxes done sooner rather than later. Too many people make the mistake of waiting until the last minute to prepare for the tax season, and this sometimes causes stress and late payments. Make it a goal to prepare your tax documents earlier than usual.
No matter how stable you think your job or business is, Good Financial Cents recommends creating multiple income streams, as this is a form of insurance for your income. This is an important financial goal that will help build your retirement savings and cash flow in the long run. This will also serve as a buffer in case one of your income sources suddenly ceases to provide for your needs.
Aside from aiming to pay off all your debts, Young Adult Money thinks it is equally important to set a goal to avoid any additional debt in the future. You can achieve this by mapping out a plan of what you want to achieve, such as going back to school or buying a car. One should start saving or investing for such plans to avoid getting into additional debt.
According to Financially Fit & Fab, investing is a great way to create wealth, and this should be at the top of everyone’s financial priorities. You should commit to investing a specific dollar amount monthly and do this regularly to start growing your money. There are different investment products available and you should choose the one that suits your risk appetite.
To prevent yourself from forgetting your due dates and avoid paying late, Budgets Are Sexy suggests automating your bill payments, especially for those bills that don’t change (such as some utilities). Although it is still recommended to manually check and monitor your bills payment on a regular basis, just to be sure that everything is paid on time and in order.
According to Financial Engines, people should make it a goal to work with a carefully chosen financial advisor. Getting professional help in making your financial plans is just as important as setting your financial goals. The right financial advisor will not only help you identify your long-term and short-term financial goals, they will also help you choose the right investments that are best suited to your goals.
Not sure what questions to ask a financial advisor during financial planning? Read this article to find out.
Setting a goal will help you identify where you are right now and where you want to be. When it comes to your finances, it’s essential to clearly define both your long-term and short-term financial goals. The financial goals we included from the pros are just a few of many you could consider. To learn more about starting a business, which was one suggestion from the pros, check out our articles!