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The Importance of Setting Financial Goals

05.07.2019 by Jack H

Like with any other worthwhile activity, when it comes to the task of building your wealth, you’re going to have to take it seriously. Your money isn’t going to grow if you have a lackadaisical attitude or take a careless approach to earning and saving. Therefore, you have to devote your time and effort to the cause if you really want to see your bank account flourish.

The most crucial action you can take in this instance is to set yourself some financial goals. Once you know what these goals are and what you’re aiming for, you will find it much easier to work towards them and ultimately accomplish them.

Still not convinced? Read on to find out why it is so essential that you set yourself some financial goals in the near future.

You need to have a financial end goal in sight

Having an end goal in sight will assist you massively with regards to staying on track with your financial endeavours. What’s more, it will help you to measure and define your success when you achieve it.

If your end goal is to earn or save a certain amount of cash by a specific date, having it to work towards will give you an idea of what action you need to take to ensure that you get the outcome that you desire. If you aren’t anywhere near your desired amount and your deadline is looming, for example, you can then take on more work in order to earn more, or you can resolve to budget better in order to save more. The point is, with your end goal in sight, you will find it much easier to make the right financial decisions at the right times.

Goals help you to come up with a realistic plan

No matter what your ambition you have in life, whether it’s to buy a house, to take a gap year, or to retire early, you need to come up with a plan that will help you to be able to afford it. Once you’ve defined your financial goals, both those of the short- and long-term varieties, you will find it much easier to come up with not just a plan, but a realistic one. This is because you’ll what you need to do to, when you need to do it, and, most importantly, what you can afford to do.

In this instance, there’s no room for anything but pragmatism. You need to work within your means and not make any plans that you know you cannot afford. Acting carelessly in this manner will no doubt laden you with hefty bills and debts further on down the line.

You’ll be able to track your progress

With financial goals in place, you’ll be able to track your progress and see how far you’ve come since you decided to build your wealth. If nothing else, this will spur you on to earn or save even more money going forward. Progression is like an addiction, and watching your bank account grow with each passing week/month will no doubt motivate you to carry on with your venture.

Goals will force you to prioritise

As touched upon previously, financial goals will help you to make the right decisions at the right times, mainly because of the fact that they will force you to prioritise. With regards to saving, for example, you might find yourself having to prioritise a cheaper alternative over a more expensive one when out doing the weekly shop. With regards to earning money, you may have to start prioritising your work life over your social life for a time in order to make more cash. All the tough decisions that you make in this instance will be worth it, though, if you reach your financial goals by the end of your venture.

Specific goals will create accountability

If you are highly specific when it comes to the goals that you set yourself, you will be held accountable for every financial decision that you make. If you, for example, resolve to buy a new home within a year, you will find yourself scrutinising every little purchase that you make. As a result, you’ll stop spending £5 here and there on things that you don’t need, and you’ll start putting those banknotes away in your savings jar.

To set yourself specific goals, you have to avoid looking too far into the future and being too generic. Stating that you want to retire early is fine, but saying that you want to retire by the age of 55 is better.

You’ll have a reason to celebrate

Day-to-day life can get a bit mundane at times and is definitely not full of celebratory events, which is why you need to forge your own celebrations as and when you can. Hitting your financial goals will be as good a reason as any to celebrate in this instance.

Through the act of celebrating your goals when you hit them, the biggest reward you could reap is the fact that you will give yourself extra motivation to work harder. By promising yourself a night on the town at the end of the month if you can manage to save a certain amount, for example, you will make all that scrimping and saving feel worthwhile.

If you’re serious about building your wealth and affording whatever it is you want to afford, you have to set yourself some financial goals sooner rather than later. Whether you wish to earn more or spend less in this instance, it’s completely down to you and your personal circumstances. With your goal in mind at all times, though, you will find it much easier to achieve.

Get your end goal in sight, come up with a plan, track your progress, prioritise as and when you need to, become accountable for your spending, and celebrate when you achieve something — do all of this, and your bank account will no doubt look a lot healthier as a result.

CCTA

Regulated by the Financial Conduct Authority