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Oportun: How to Set Financial Goals for the Future

Apr 15, 2024


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From reaching financial stability to sending one’s children to college, setting financial goals is one of the first significant steps in reaching the goal. As tangible targets to aim for, goals help keep people motivated and focused. This article will dive into five steps for setting and accomplishing financial goals:

1. Create a List of Financial Goals

First, it’s important to create a list of short-term and long-term financial goals. Short-term goals are generally achievable within one year. Some examples of these include:

  • Building an emergency fund
  • Saving for larger purchases, such as furniture
  • Reducing high-interest debt, such as by consolidating credit card debts with personal loans

Long-term goals are generally achievable in five years but can sometimes take longer. Long-term goals to strive for include:

  • Saving for retirement
  • Saving for children’s college education
  • Buying a home
  • Buying a car
  • Building a business
  • Improving one’s credit score

2. Identify Potential Obstacles to Those Goals

The road to any financial goal may contain obstacles—which can differ between people— that can hinder progress. First, identify these potential obstacles and then determine ways to overcome them, minimizing setbacks. For instance, for the goal of building an emergency fund, an obstacle might be getting sick and being out of work for a few weeks, reducing the amount of available cash to set aside in savings. Using a smart savings tool like Oportun’s Set & Save may help overcome the setback by increasing the amount saved when it makes sense, and reducing it to nothing when there is no income coming in.

3. Assess the Current Financial Situation

Goals are the destination. To know how to reach that destination and overcome potential obstacles, individuals must know where they stand now. To evaluate each aspect of the current financial situation, review:

  • Income
  • Expenses, both fixed and flexible
  • Assets
  • Debts
  • Savings

Compiling this information helps one see the distance between their current situation and their goals.

4. Set Fixed Savings Amounts for Goals

Once someone knows their goals, potential obstacles, and current situation, they can break them down into fixed savings milestones. For example, say a couple wants to purchase a home in five years. Their budget is $150,000 and they want to save $30,000 in cash for a 20% downpayment. That breaks down further to $6,000 each year, or $500 monthly. So, the couple must set aside $500 of income every month. Creating fixed savings milestones can help make achieving the goal seem more attainable.

5. Monitor and Adjust

Tracking progress is crucial because many factors can impact progress positively and negatively as one moves toward their goals. For instance, inflation could cause one’s expenses to increase. One may have to adjust their savings goals or find ways to cut costs to stay on track. On the other hand, one might rapidly advance in their career and see significant income growth. They could read just their goals or save extra to reach goals faster.

Even goals can change as one moves through life. They might discover later that they need to retire in a city with lower living costs. This means they could potentially retire earlier by saving the same amount or reduce their monthly retirement savings to put toward other goals.

The Bottom Line

Achieving financial goals can be easier by following the steps outlined above. First, one must write down their short-term and long-term financial goals, then identify obstacles that could slow progress. They also should evaluate their current situation. After taking these steps, they can set fixed, recurring savings amounts to reach those goals on time. That said, people must monitor their progress regularly and adjust to account for external factors and changes in their goals and preferences. By creating a plan of action, staying disciplined, and celebrating milestones along the way, one can build a bright financial future.

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