I think that setting financial goals is the best way you can prepare your personal finances. With goals, you have targets to achieve. As a consequence, you're almost forced into being smart with your money, or else you’ll never reach these targets.
On the other hand, without goals, you have absolutely nothing to aim for. This inevitably leads down the path of reckless spending, which puts you in an awful financial situation.
Yes, there are short-term goals you can set, and they can be helpful if you’re in a bit of a pickle and need to get back on your feet. Things like reducing your monthly spending are great short-term goals. But, today’s post is all about the long term. Here are a few goals you should set for yourself and aim to achieve in the next ten years or more:
Get clear of all your debt
Most people end up in some kind of debt during their life. For a lot of us, this comes from poor financial decisions we made when we were young. I’m talking about reckless credit card usage creating lots of debt, taking out loans that we maybe didn’t really need, and just bad spending habits in general. But, some debt is good debt - which sounds hard to believe. Some of you are probably very smart with your money, but you still have debt from your student loan or mortgage. In these cases, it’s almost necessary to go into debt as a way for you to achieve remarkable things. Student loans are hefty, but you gain the skills needed to forge a successful career. Mortgages are massive, but you finally own a property.
Regardless of whether your debt is good or bad, you don’t want to be paying people for the rest of your life. So, set yourself the long-term goal of being clear of all your debt. When you no longer owe anyone any money, then you have more financial freedom.
Ensure you have a healthy retirement fund
You’re never too young to plan for retirement, and one of your key goals should revolve around saving for the day you hang up your metaphorical work boots. There are plenty of ways you can save; some people opt for a 401k from their employer, others look into things like a self directed IRA. Any option is a good option, just make sure you’re saving enough money to create a substantial retirement fund. The sooner you start contributing to this goal, the more money you’ll have when you retire.
Establish an emergency fund
Your retirement fund isn’t the only thing you should be thinking about, there’s also the question of an emergency fund too. With one of these, you essentially have money that’s there in case of emergencies. Think of it as a financial safety net that will catch you before you fall. There are loads of unpredictables in life - like accidents, health problems, etc. With an emergency fund, you’ve got money to call upon when you need it most.
Start an investment portfolio
It’s always a great idea to have some investments under your belt. Investing money is a smart way of saving it - and you get better interest than you do with regular savings accounts. If you play your cards right and invest in safe assets, then there’s hardly any risk of losing money. You can invest in things as part of your retirement plan, but it’s also a good idea to have separate investments that you can cash in on whenever you want. People assume you have to spend lots of money on investments, but you can invest as much as you like. My only advice is to get professional guidance beforehand - talk to a financial advisor at your local bank.
Open up new sources of income
It might seem greedy to try and open up new sources of income, but it’s actually genius. If you have other ways of getting money, then it becomes less of an issue if you get made redundant. Some investments can help you gain a regular source of income - the most obvious is buying a property and renting it out. But, there are loads of other ideas that can help you complement your primary income source with extra additions of cash. Even if it’s something simple like doing a bit of freelance work on the side. The more income sources you have, the more financially secure you become.
Do you want to take better care of your finances? If so, then start looking ahead to the future with these long-term goals. Set a target for yourself - this could be ten years, twenty years, or a specific age. Try and set the wheels in motion from now on to ensure you reach these goals by your target.