Your financial goals in life should serve as a shining beacon that you look up to as you take on your life’s journey. It is just like how ships at sea are guided by the bright ray from a lighthouse especially during rough times. Your financial targets will guide your various decisions in life. It can be that light at the end of the tunnel that you look out to when things get a little tough.
With this in mind, it is important to understand the work that goes into reaching your goals. You need to be aware of how financial planning plays a crucial role in your journey to properly lay out your budget. You should also have a sense of what is doable and what is just wishful thinking when it comes to your goals.
When the topic of financial targets come to mind, you need to educate yourself to use the right investment tools that will help you accomplish your goals. Sadly, Northwesternmutual.com revealed that only 51%of Americans own a life insurance policy. This says a lot about the awareness of consumers when it comes to forward planning.
In all these, there is one thing that encompasses most. As you plot the most workable plan to reach your financial goals in life, you need to consider one very important factor – time. As you chalk up the most effective route to your targets, know that time has an important role to play in all your undertakings.
Time component in your financial targets
Here are a few things to know about how time influences your financial targets.
- The older you get, the shorter your earning potential is. As you age, you would agree that there will come a point where your earning capacity will start to diminish as you close in on retirement. You would have a hard time putting in overtime at work or even aggressively chase down clients left and right for weeks and months at a time. You might also start to slow down with the management of your business as you try to spend more time with your family or you are simply prioritizing your health. In all these, you are slowly losing your earning potential and if you have not been saving in the past, it would be more challenging to do that as you get older.
- You lose on the power of compound interest. Compound interest is the key to making yourself financially successful. Take your credit card usage for example – whenever you send out a late payment, you would notice that your total amount due for the next month swells up. This is the power of compound interest working in favor of your lender. The interest payment was added to your principal amount and accrued interest for the succeeding month. This is a quick way to get you in the red. Now switch it up and imagine you get to make investments early in life – compound interest would work in your favor as you earn interest on interest over time. The longer you get to do it, the bigger the amount gets.
- You have to make payments for a longer time. When you start late in life with your goals and your dreams, there is a big chance that you get to finish some things late as well. This can complicate things especially when they are not aligned with your timeline in your financial goals. Take buying a house for example – as it remains to be on top of the dream of most consumers to own a home, there are some who are just too afraid to take the plunge. If you keep on waiting and finally decide to take out a 30-year mortgage loan at age 45, you have to keep paying that until you reach 75 years old. Same with a car. This is not to say that you should just go ahead and take out loans left and right in your youth. The bottom line is to factor in the repayment timeframe so you are not tied to many payments down the line.
- Rebuilding credit score takes time. Foxbusiness.com shares that 1 in 3 Americans is nursing a credit score south of 601. This could be manageable and you might think that you have time to bring it up when the need arises. But you need to remember two things – one is that there are instances or even emergencies where your credit score can figure in significantly. Like a loan that you need to take out for unexpected circumstances. The second is that it takes time to bring a score up. It is easier and a lot better to maintain a high score rather than pick up and try to revive a low one.
- Your kids are all grown up. Yes, you need to put a premium on your children’s financial future for two reasons – their financial stability and your peace of mind. Their financial stability will mean that they will have the tools they need to manage their finances on their own. When this happens, you have peace of mind knowing that they have the training to make good financial decisions and that they would not be knocking in the middle of the night asking for a dole out. But again, this is one of those financial goals that looks at time as an important factor. The sooner you get started, the better they learn. This is because they always seem to grow up too fast. They are running around the house one minute and heading off to college the next.
- You fail to improve on your craft. As you go through life, you need to constantly make improvements in your craft, hobby or area of expertise. You continuously need to learn because life never stops giving lessons. Find time to enroll in classes so you get to learn a few more about your hobbies like photography or baking. Allot time in a day to look over tutorial videos or even invest in seminars to make you more valuable in your office. This helps you improve your worth and it can even increase your take home pay. But you need to need to do this over time so you get to enjoy the benefits rather than doing it all at the end and not having any use for them.
Using time to your financial advantage
Here are a few things you can look into to get you to use time to your financial advantage.
- Start early. With investments, funds or any other financial plans, you need to start early. This again points to the power of compound interest and using it to your advantage in reaching your financial goals. You might be trapped in that cycle of trying to wait for the right time to dabble in investments because you do not know enough, do not have enough or just plain scared. There are options you can choose from depending on your risk appetite so you get to manage your anxiety when it comes to investments. The important thing is to start early so you can either learn early or earn early.
- Be mindful of financial leaks This refers to avoidable payments on fees, interests and other charges you keep on paying for mismanaging your budget. NFCC.org shares that about 25% of American adults fail to make on-time-payments on their bills. This can lead to unnecessary fees and charges that not only ruins your budget but sets you back as well in terms your target. Rather than using that money to get to your target, you now have to recoup that amount just to stay on track.
- Know if you need help. What you need to remember when you are treading into your financial journey is that you will never know everything at the onset. There are options you can take and one of those is getting professional help. What you need to remember is that the earlier you do it, the sooner you get to do things correctly. It is better to learn and make a few mistakes early in your financial journey rather than mess it up at a later part. Time will definitely not be on your side when this happens.
There are a lot of factors that goes into planning to reach your financial goals and in all these, time plays an important role. You need to consider how it affects your financial decisions and how you can use it to your own advantage.
Here is a video that will help you manage your time better.
Common questions about financial goals
Question: What are financial goals?
Answer: These are basically life goals that require you to save your finances so you can reach it. An example is a $1 million retirement fund. It can even be your dream home. Both requires money to help you reach it.
Question: What are financial goals for the family?
Answer: The financial goals that you will set for your family should be something that benefits everyone or will help make the family secure. For instance, you can buy a house so the family has at least one asset to fall back on. It can even include setting up a 6-month emergency fund. It all depends on what is important for the family and your lifestyle preferences.
Question: How do you track financial goals?
Answer: A budget plan is one way to track a financial goal. Or you can create a monitoring sheet that tracks how much money you have put aside for specific goals. Tracking your progress will allow you to see how much is needed before you reach your goal.
Question: Why are financial goals important?
Answer: This is important because it influences your financial decisions. It gives your decisions direction. You do not just decide to buy something. Every purchasing choice will be validated against your financial goal to see if it is aligned. It helps make you a smarter financial manager.
Question: How to successfully achieve financial goals?
Answer: You need self-control and discipline to reach a goal. Not only that, you need to track it properly. It also helps to motivate yourself through milestone rewards – especially for long-term financial goals. Celebrating small successes will encourage you to reach the next milestone.