Published in: Banks | May 10, 2019
3 Financial Goals You Should Start Setting Now
By: Christy Bieber
Want to get ahead financially? Here are a few key financial goals you should set for yourself to achieve this dream.
Image source: Getty Images.
Becoming financially successful is a dream for many people and it’s a dream that’s within reach. You just need to be smart about the financial goals you set and make sure you’re managing your money wisely so you’re working toward achieving them.
If you’re not sure where to start when it comes to setting financial goals, here are three that you should strongly consider adopting -- no matter what your situation is.
1. Save 20% of your income
If you hope to achieve any financial success, you need to save money. You need savings for emergencies, as well as for big purchases and to accomplish short-term and long-term financial goals.
Ideally, you’ll save 20% of your income. Around 15% should go to retirement savings and the rest can go towards accomplishing other things, such as sending your kids to college without debt or saving for a home down payment. While traditionally many financial experts advised saving 10% of income for retirement, this isn’t really enough given projections about stock market performance and high healthcare costs for seniors.
The more you can save the better. But, if you work up to putting aside 20% of what you earn, you should be on track to financial independence as a retiree while also ensuring you have money for other things you need throughout your life.
2. Avoid debt for assets that don’t increase in value
Going into debt can sometimes make sense if you get a mortgage for a home or if you pay to earn a degree that will increase your income. Mortgages and student loans are classified as “good debt” because a home and an education are investments. Ideally, your house will go up in value and one day you’ll have it paid off and be able to sell it for more than you paid. And, hopefully, you’ll increase your earnings thanks to your education so you’ll have more money to spend and save.
But, going into debt for assets that don’t increase in value is a bad idea. When you borrow for depreciating assets, such as a vehicle or home furniture, you’re paying interest on purchases that -- in most cases -- immediately aren’t worth what you owe on them. You’ll end up spending more for each of these purchases while the things you bought on credit won’t increase your net worth enough to offset the liability you’ve taken on.
If you’re already in debt, paying it off should be your primary financial goal. If you don’t currently owe on credit cards or a car loan, make it your goal to avoid ever taking on these kinds of debts. You can do this by living on a budget and saving up for a car or other big purchases.
3. Invest your money wisely for your future
Finally, another key goal should involve getting smarter about what you’re doing with the money you’re saving and investing.
If you want to build wealth -- even just to have enough money for a comfortable retirement -- you need to invest in assets that produce returns. It would be nearly impossible to save up a big nest egg if your money isn’t working for you and growing, so you need to figure out how to make sure your money earns money.
In order to invest and grow wealth, you’ll likely need to put at least some of your money into the stock market. That means you’ll need to know how to research investment opportunities.
The easiest approach is to research exchange-traded funds and buy several that give you exposure to lots of different assets so you have a diversified portfolio full of low-cost investments. But, you can also research individual companies and buy stock shares so you own a piece of particular businesses you think will do well.
Whatever you do, make sure you understand how an investment is supposed to make you money, what the risks are, and what fees you’ll pay. If you can answer these questions, and you focus on investing in different kinds of assets so you don’t put all your eggs in one basket, you should be well on your way to investing wisely.
Fulfilling these financial goals will set you up for success
If you can avoid debt, save money, and invest it wisely, you should be able to achieve financial success no matter where you’re starting from. Just make sure that you consider the big picture when you make money decisions, and that you set detailed goals and track your progress so you’ll know if you’re on track to achieving your dreams.
Savings account rates are skyrocketing -- Earn 25x your bank
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you more than 25x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2019.