Nearly everyone has dreams for years or decades from now, including retiring early or starting a business. This makes creating long-term financial goals an excellent idea for most people. This process is different from short-term aims because you aren’t necessarily saving for a significant purchase. Instead, you are working toward life-changing financial freedom in the future.
Many individuals find setting long-term financial goals overwhelming because it can take years, if not decades, to see results. This plan involves a series of spending, saving, and investment targets over a set period. The idea is that you take small steps toward a massive goal every year, ensuring it gets closer as time passes. These goals can seem impossible at first, but making steady progress eventually makes them achievable.
This guide will show you the benefits of setting these goals and take you through some of the necessary steps when making them.
Examples of Long-Term Financial Goals
Looking at a few potential objectives can give you some ideas for the future. Starting on them as soon as possible helps you achieve them, and the financial security that goes along with them, at a younger age. Here are some goals that could go into your long-term plan:
Saving for Retirement
One of the most common goals is to save for retirement. This aim could involve retiring early, if you get an early start at it, or at retirement age, for those starting their retirement fund late. The first step toward retirement is often contributing to an individual IRA or your employer’s 401K. These plans allow you to put money in mutual funds or stocks (depending on the brokerage your plan is with) and let it grow. You’ll be surprised how quickly that account can grow into a nice nest egg that you can retire on in your 60s, or even earlier.
Creating a College Fund for Your Child
New parents could have a long-term financial goal to pay for their child’s college. Putting money away when your baby is born makes it far more likely you’ll have enough cash put away when the time comes. This could end up saving your child thousands in costs like interest payments because it may mean they can avoid student loans in the future.
Paying Off the Mortgage Early
Your mortgage is probably hanging over your head every month, so paying it off early could become a priority. Those with a 25-year mortgage, for example, might try to pay it off in 15 years so they can realize an additional 10 years of financial freedom without those payments.
Eliminating All Debt
Debt is overwhelming for many. Credit cards, student loans, personal loans, car payments, and mortgages can become inescapable financial burdens. Your plan could involve paying off all your debt early, so you aren’t left treading water for the foreseeable future.
Your long-term financial goals are up to you, but these examples should give you some ideas of what is achievable. Figure out your goals before developing your financial plan and budget so you know what you’re up against. Working with a professional can help you select the best course of action for your situation.
6 Things to Remember When Setting Financial Goals
Creating a plan is the next step after figuring out which financial goals you want to achieve. There will likely be some challenging decisions during these steps, but you’ll also begin to see the fruits of your labor if you’re willing to stick with the strategy.
1. Make Spending Cuts
There’s a good chance you’ll have to reduce your spending if you wish to make any serious headway. Start by coming up with a list of areas you could easily cut. You will also want to include things you would struggle to eliminate and items impossible for you to do without. This list can act as a framework for the rest of your approach.
2. Develop a Timeline
Some financial goals are easily within reach, while others could take time to achieve. Your timeline should be realistic while still providing you with hope for the future. Paying off your mortgage early, for example, is probably years in the future, but having an idea of when it will happen gives you something to strive for in the meantime.
3. Apply a Goals Strategy
A SMART goal strategy is a great tool when developing your plan. SMART stands for specific, measurable, achievable, relevant, and timely. Make sure your objectives and timeline follow this guidance.
4. Create a Budget
Your budget should incorporate your spending cuts, timeline, and strategy. The final plan will show you what’s coming in and what’s going out every month, giving you a clear understanding of what you can spend while staying on track.
5. Reward Yourself
Even a strict budget should leave you with a few extra dollars at the end of the month. This money is available to reward yourself, possibly by purchasing items you cut from the budget that you really didn’t want to. Splurging once in a while makes it easier to stay on budget long-term.
6. Monitor Your Progress
Keep an eye on how much progress you’re making toward your long-term financial goals. Putting money toward retirement or the mortgage is great, but it can feel like you’re sending cash away without getting anything in return if you don’t monitor the headway you’re making.
Every plan is different, and you should think carefully about what you want to achieve and how you plan to get there. Efficiently managing your finances can turn your long-term financial goals into a reality, as long as you’re willing to put in the effort.
Get Expert Help with Your Finances
Creating long-term financial goals can seem nearly impossible when looking at the numbers yourself. There is assistance available, however. The expert financial advisors at Bogart Wealth can create an overall plan, complete with a budget you can handle, ensuring you get the best possible result as you work toward your goals.
Bogart Wealth provides custom financial planning services in McLean, VA, and Houston, TX. Our team can make the entire process more manageable, so all you have to focus on is sticking to the plan. Contact Bogart Wealth for more information on our financial planning services.