You miss 100% of the goals you never set.

Financial goals are critical to your financial success. They are the GPS for your dollars. If you never set financial goals, your money does not have focus or direction.  

How do you expect to accumulate wealth for retirement? 

How do you expect to leave generational wealth for your family?

Wealth does not accidentally happen. It happens with intention, direction, and then execution.  

This article will outline the top categories you should create financial goals for. Whether the goals are short or long-term, you should consider having a goal in each of these categories.    

Income Goals

Inflation is real. Every year the cost of products and services increases. According to the US Bureau of Labor Statistics, inflation increased by 7 percent over the past 12 months.   

As the cost of everything goes up, so should your income.  This is why you need an income goal.

Some believe that their salary is all they can earn, but that is not true. Your earning potential is limitless IF you develop the skills to command more income. Money is a value exchange.  If you have more to offer to the marketplace, then the income will follow. 

Here are a couple of questions that you should ask yourself when creating your income goals. 

• How much money do you want to earn?

• How many streams of income do you want to create this year?
  • Studies suggest that the average millionaire has at least seven (7) streams of income.  Please note that this does not mean you need to have seven different jobs.  Some money could be through passive income sources.  

• How often do you want to earn money?

• The traditional approach to earning money is every two weeks or the 1st and 15th. But money can be earned daily if that is what you desire. For example, successful business owners earn money daily. Real estate investors typically are paid at the beginning of the month, but it can be a significant source of income when generated from several homes.  This increases income without  exchanging time for dollars.   

The opportunities are endless. It comes down to what you believe is possible for you and what effort you give it to become a reality. 

Examples:

• Earn an extra $500 a month by providing coaching or consulting services starting in Mar 2022.

• Buy my first rental property with positive cash flow and at least an 8 percent return by Dec 2022.

• Earn an additional $300 a month by renting my car on Turo (or another peer-to-peer car rental site) by June 2022. 

• Receive a promotion at work and negotiate a salary increase of at least $7000 by August 2022. 

Debt Repayment/Elimination Goals

All debt is not bad. Debt, if used responsibly can accelerate your wealth-building journey. But, if used irresponsibly then it will significantly hinder your journey. If you have significant debt, you have to allocate your money to pay off those commitments, rather than increasing your investments.   

If your debt is not providing a return on an investment or you just prefer to eliminate all debt, then you need to create a debt elimination goal.  

Check out: What Should I Do First: Pay Down Debt or Save for more tips to create this plan.  

Examples: 

• Pay $100 more on my car note every month to pay off my car by Feb 2023.

• Pay off the remaining $2500 bill on the Chase credit card by Sept 2022.  

• Reduce student loans by $5000 by Dec 2022. 

The key to paying down debt is to stop creating new debt. If you continue to pay more than the minimum payments and do not accumulate more, then eventually your debt will be paid. The speed of when this is accomplished is up to you.  

Cash Reserve Goals

Having cash reserves positions you to respond quickly to unexpected events or investment opportunities.  Cash reserves also can prevent an inconvenience from turning into a financial disaster. When you are in a position to respond rather than react, you can focus on the decision at hand rather than on how you will pay for it.  

Savings and having a cash reserve are underrated and not sexy, but necessary. You should strive to have at least 3 to 6 months of living expenses in your savings account. Focus on saving your mandatory living expenses first, not the nice to have such as entertainment subscriptions or hair/nails costs.  As you reach this goal, then you can save 6 to 8 months of your salary.

Once you have that money set aside, then continue to build your cash reserve for future investments that you want to make.  

Check out: Why I Don’t Save For Emergencies – Do This Instead

Examples:

• Save 4 months of living expenses ($5000) in my cash reserves account by Jan 2023.

Investment Goals

Albert Einstein called compound interest, the eighth wonder of the world.  

“He who understands it, earns it … he who doesn’t … pays it.”

In order to earn it, you must invest your money. Savings accounts are great to have for quick response items, but it offers minimum to no interest.  The current average savings interest rate is less than 1 percent.  You will not create generational wealth with that level of return.  

This is why compound interest is important to understand.  Compound interest is when you earn interest on your money, reinvest it in the principal and then earn additional money on the higher principal. 

This is your money making money for you. 

The earlier you start this process, the longer your money has time to compound over time.  

If you want to build wealth, this is why you need to have investment goals.  

Investment goals can be inside or outside of a retirement account.  That is dependent on when you would like to access the money without penalty.  

An unconventional opinion that is promoted within the FIRE (Financial Independence Retire Early) community is that retirement is not an age but a number.  Once you reach that number, you can retire.  

Check out: How to Calculate Your Financial Independence Number 

Examples:

• Contribute the up to the employee match in my 401K by Dec 2022.
• Contribute $416 monthly ($5000 annual)  to a Roth IRA account by April 2023.
• Contribute $250 monthly ($3000 annual) to a brokerage account and invest it in an exchange-traded account.
• Open a custodial account for my daughter by May 2022 and contribute $100 a month.

Financial Education Goals

The direction of your financial future is correlated with your level of financial literacy. No one cares more about your financial success than you do. Yes, you can hire a financial advisor, but you want to ensure you can confirm what they are telling you. Do not take advice as the final truth, without confirming it first.  

Another rule of thumb is to invest in things that you understand. Why? Because by the time you realize that you made a mistake, it will likely be too late. I am not saying you need to become an expert, but you need to be competent enough on the topic to ask the right questions and research what you do not understand.  

This is why you need to have a financial education goal. Money plays a large part in our lives. Too often people spend so much time chasing money that they do not realize that you need to understand it first.  Once you understand it, you can tell it what to do, and the money will come to you.

Seek to understand first. Then execute.

From this understanding, you will be able to optimize what you currently have so that you can handle more.    

Examples: 

• Read 6 financial education books by Dec 2022.   

• Follow at least one financial education blog or podcast weekly and take action within seven (7) days.  
  • This blog is a good option, but I’m biased. 

• Select an investment strategy and invest in training education to learn this skill.

Conclusion

Building wealth happens over time so do not feel overwhelmed if you do not have everything included on this list.  That’s ok.  Start where you are, take action and build over time.  The important part is to remove the limiting beliefs and Most importantly, take action and be consistent.  

That’s getting your Finances On Point.