Some people do New Year’s resolutions. Let’s establish
up front that goals are something more substantial than dreams or wishes. Start by setting some financial goals. If
you’ve never thought much about this, here are 10 good financial goals that
everyone should have.
1. Get Out of Debt –
Completely
The great thing about this goal is that anyone can do it,
regardless of income or wealth level. There are more reasons to get out of debt
than I can list here, but here are just a few of them:
- Getting out of debt means that you’ll have full
control over your income – and that’s an incredible feeling
- It will leave you with more money for savings
and investing – and even more for spending
- It will remove the asterisk from your finances
– I make $X,000 per month, but $X00 has to go to pay my debts
2. Plan For Early
Retirement
Even if you absolutely love what it is you do for a
living, planning for early retirement is one of those top rated good
financial goals. Here’s why:
- Reaching your retirement goals may take longer
than you think; if you plan to retire at 50 you’ll have plenty of time to make
it by 65 in the event that you hit a few snags
- Poor health could make early retirement a
necessity – if you’ve planned and prepared to retire early, then you will
be ready
- Family circumstances often require more of your
time, and early retirement will help you to have it
There’s one other advantage to planning to retire early, and
it’s a big one. By working toward early retirement, you will be front-loading
your retirement investment portfolio.
3. Have a
Well-Stocked Emergency Fund
Here are just some of the benefits that a well-stocked
emergency fund can provide you with throughout your life:
- It can take away a lot of the money worries that
you have, since you know that you will always have a reserve should you get
into a tight spot
- As is expected of an emergency fund, it will be
there to cushion the blow in the event of a sudden emergency, such as a job
loss or a large medical expense
- It’s an important money management tool – if you
can save money for an emergency fund, then you can save money for any financial
goal that you have
When you consider all that comes from having a strong
emergency fund, it should move it up the priority ladder a few rungs. Here are
some the top savings account options for your emergency fund.
4. Create Multiple
Income Streams
Even if you love your job, creating multiple income streams
is a form of income insurance. Here are even more reasons:
- One of those income streams could be the
part-time cash flow that enables you to semi-retire at an early age
- If you want to start your own business –
but don’t want to quit your job – starting aside business could be the way
to do it
- The extra cash flow from any additional income
stream could be used to help fund your retirement savings
Give this goal some serious thought, even if you’ve never
considered it before. It’s a goal that could open the door to a lot of other
goals.
5. Have Enough – But
Not Too Much – Insurance to Cover Contingencies
Insurance is something of a tough call. Striking a balance
between the two is another of those good financial goals. Here are some
strategies in striking that balance:
- Where life insurance is concerned,
stick with term life insurance – it’s cheaper so you can buy as much as you
need. Just make sure that you’re not buying so much life insurance that you’ll
be worth more dead than you are alive; it’s just an expense you don’t need to
carry
- Unless mandated by state law, look into the
carrying the lowest level of auto insurance possible, particularly if you
have a long history as a safe driver
Part of your goal should be to work with a knowledgeable
insurance agent on a regular basis to make sure that you have just enough – but
never too much – insurance coverage.
6. Be Able to Live on
Less Than You Earn – No Matter What
I’ve covered this topic in other articles, but it is well worth
repeating here since it is one of the most necessary of all good financial
goals. By learning to live on less than you earn – no matter what – you will
always have plenty of income. That means that you’ll have plenty of income for
savings, investments, and for paying off debt.
7. End Any Addiction
to Stuff That You May Have
A disproportionate amount of your income and financial
reserves will go to pay for your need for stuff. This will present several
problems:
- Stuff needs to be stored, and as your pile of
stuff grows, you will need an ever larger space to store it. That will likely
see you looking to buy a bigger house every few years, with all of the expenses
that come with it
- Stuff is a capital trap – it ties up your money,
but generally provides no financial benefit
- Any money that goes into stuff, is money that is
not going into productive investments
If you even suspect that you may have an addiction to stuff,
then make it a financial goal to end that addiction once and for all. Your
life will go better if you do.
8. A Plan to Do Work
That You Love
Ultimately, the purpose of improving your finances should be
to provide you with independence in your life. That means that it should afford
you the ability to do what you want, when you want. If that isn’t one of the
good financial goals, then I don’t know what is. Since you will be working all
of your life – one way or another – the work that you do shouldn’t just be
about earning money. It should be something that makes you feel good about your
life, and good about the person you are.
9. Get Comfortable
Sharing Your Good Fortune
There are numerous reasons why giving to others will be good
for you:
- Letting go of money affirms your power over it –
because you know that it will come back
- Giving to those in need makes you part of the
solution in the world, and not the problem
- Hoarding money is all about security – letting
go of it is celebrating its value
Is giving one of those good financial goals? I think that if
you look at many of the most famous wealthy people the world, you will see a
distinct pattern of giving to others along the way.
10. A Plan to Leave
Your Financial House in Order Upon Your Death
Here are some steps you can take to leave your financial
house in order upon your death:
- As discussed in #5, make sure that you
have adequate insurance, particularly life insurance
- Make sure all of your debts are paid, and if
there are any large or unusual ones, by a term life insurance policy to payoff
that debt upon your death
- Consider the impact of estate taxes, if your
estate is large enough to be subject to them (insurance can cover that too)
Reaching a point of financial independence in life has
nothing to do with luck or magic. It’s simply a matter of setting good
financial goals, and having a concrete plan as to how you will achieve them.
Once that plan is established, and working toward those goals becomes part of
the habits that make your life what it is, achieving financial independence can
almost seem as if it’s happening on automatic pilot.
Click here to access the full
article on Good Financial Cents.