Why set financial goals? Goals give you a purpose. It’s one thing to say you’re going to do something, but to actually make it into a goal and put a plan into action is another. While everyone has different financial priorities, there are certain fundamental financial goals we should all be striving for. These goals help ease stress and put you in a stronger financial position. Everyone has their own goals, especially financial goals. But depending on your age, and specifically for millennials, we see similarities. The following is a list of financial goals young adults should be considering:
Create a budget and stick to it
This is a biggie. Tracking your spending and budgeting is a surefire way of making sure you’re achieving your financial goals as well as not spending beyond your means. I put this at number one because it’s something you’ll use throughout your life, no matter what your financial standing is. It’s personal finance 101, your budget is the core of your finances. New to budgeting? Check out my post here on how to get started.
Build an Emergency Fund
60 percent of Americans cannot afford to cover an unexpected expense. Which means people will put themselves into debt or borrow from someone they know if the need were to arise. Having an emergency cushion will help ease the “what if” of your car breaking down or that sudden trip to the emergency room. They say a good rule of thumb is three to six months of expenses. You should determine how much you need based on what makes you comfortable. What are your responsibilities? What are your bare minimum expenses that you incur every month? Use that as a guideline to come up with your goal. Don’t expect to fund this overnight, it’s going to take time to build. The important thing is that you’re making it a priority. Try and get to at least $1,000 before adding in other goals. This amount will cover most insurance deductibles and other common emergencies.
Pay down debt
Yes, this comes second to your emergency savings! Some will argue that paying down debt is more important than saving, and I don’t disagree. But there is a difference between having an emergency savings and saving for other goals (i.e. retirement, vacations, etc.). I don’t want you going into more debt because you don’t have an emergency savings. This could create an endless cycle. Build that $1,000 minimum in your emergency savings and then start tackling debt. Interest you pay on credit cards, student loans, and auto loans currently outweigh interest rates you earn on savings significantly. Most brick and mortar banks are paying a measly 0.01% in interest and online banks are hovering around 1.0%. Compare that to credit cards being able to charge a 24% APR these days, you’d be losing money by letting your money sit in the bank and not paying down debt. Don’t get me wrong, I want you to save. But once you reach an amount that makes you comfortable in an emergency fund, move on to debt.
Start working debt payments into your budget and always pay more than the minimum. Consider using something like mint.com to create goals and track your progress.
Start Saving for Retirement
I know millennials are young and we are years away from retirement, but we need to start saving today. We have so much time on our side, even investing the smallest dollar amount will make a huge impact. Some may sacrifice putting off their retirement savings until their debt is completely paid off, and that is personal preference. My personal preference is making sure I’m saving enough for retirement while also paying down my student loans.
How do you save for retirement? Most employers should offer some type of 401(k) plan or 403(b) plan (remember to always go for the company match!). If your employer doesn’t offer a plan, consider a Traditional IRA or a Roth IRA.
Determine long-term financial goals
Starting to plan for long-term financial goals is exactly how you are going to achieve them. Our generation is known for wanting instant gratification, it is very hard to be patient and do something today that won’t reap an immediate benefit.
Do you want to buy a house someday? Maybe paying down your student loans is a long-term goal for you. What about buying a car? These goals take time to fund, so it is very important to figure out what it is you want and start doing something about it today. The goal might adjust over time, but at least you’ll have gotten a head start.
Create a side hustle
There is nothing wrong with earning a little extra cash. Side hustles are great to help fund those goals of yours. Maybe you don’t have extra room in your budget, but you want to plan a vacation or start aggressively paying down some debt. Finding extra income is a great way to reach your goals faster.
It could be dog walking, pet sitting, babysitting, bartending, retail, etc. etc. etc. The options are endless. What are your skills? What do you enjoy doing? Can these things translate into additional income?
Always educate yourself about personal finance, pay attention and ask questions. What you’re doing today matters and it is impacting your future one way or another. Think about what your goals are, write them down, and put them into action. Writing your goals down is a great way to make them seem more real and also is a great way to track your progress. I create my financial goals at the beginning of the year and check-in often throughout. You must hold yourself accountable if you want to attain your financial goals.
Carolyn Rowland is a CERTIFIED FINANCIAL PLANNER™ passionate about empowering individuals to take control of their financial landscape. “We often tend to place our own priorities on the back burner for others, resulting in sacrifices we don’t often realize we’re making.”Carolyn believes in taking a values-based approach to financial planning. “Together we’ll define what matters most to you, what you want your life to look like, and develop a plan that fits your lifestyle.”
Carolyn Rowland is in the Milwaukee WI, area.