What would you say is the difference between financial goals and money goals?

Money goals are things that you want to achieve financially. Financial goals are things that you hope to accomplish in life. For example, maybe you want to save enough money to pay off your student loans or get out of debt. Or maybe you want to retire early or travel the world.

In today's article I am going to explore the different types of goals we can set for ourselves. We'll look at both long term goals as well as short term goals. And then we will talk about how setting goals helps us reach our dreams. So let's dive right into it!

What Are The Different Types Of Goals?

There are two main types of goals: Short Term and Long Term. Let me explain what each one means.

Short Term Goals

Short term goals are those that have a definite time frame. They usually last from 1 week to 6 months. These goals include things like saving up money for a vacation, paying off credit card debt, or getting ready for an important event such as a wedding or graduation.

Long Term Goals

Long term goals are those that don't have a specific timeframe. Some people use them to plan their entire lives. This could be something like retiring early or starting a business. It might also be something more concrete like buying a house or traveling around the world.

Setting Goals Helps Us Achieve Our Dreams

So now that we know what they are, why do we need them? Well, first, because they help us focus on what matters most. When we're working towards a goal, we tend to put all of our energy into it. That way, we don't waste any time doing anything else.

Second, when we have savings goals, we find motivation to work hard towards achieving them. Without goals, we may not even try to make progress. But if we've got some kind of target in mind, we'll often feel motivated to keep pushing forward.

Third, goals give us direction. If we don't have any clear idea of where we want to go, it can be really difficult to figure out how to get to where we want to go. But once we have a goal, it becomes much easier to see exactly what steps we need to take to get there.

Main Financial Goals

Fun

So this isn't a proper category however I class this as anything that doesn't have a positive financial impact on your future. So for example, savings for a holiday, wedding, etc.

House Savings

This is a goal most people will experience in there life. Most likely the savings will be for your deposit and any expenses related to the sale of the property. According to Home Owners Alliance the general rule of thumb is that your monthly income should cost no more than 35% of your income post-tax.

This rule will allow you to have enough money left other each month for other necessities. Knowing this value you can find out the property value you can afford in accordance with your income and furthermore will be able to work out the deposit for the property.

Emergency Fund

An emergency fund is a great way to prepare yourself for unexpected events. An emergency fund is simply a cash reserve that you can draw upon in case of emergencies. I personally think £1000 is enough for most people however there is also a well known rule for your emergency fund as well.

The rule according to Money Helper and many others is that your emergecy fund should cover at least 3 months worth of living costs. To be specific this is not 3 times your monthly wage. This is 3 times your most crucial expenses. Everything you need to survive and no entertainment related expenses.

This means the goal doesn't have to be as high but if you want to be even more safe, you can save up to 6 months worth of living expenses. This means that let's say in the worst case scenario, you lose your job. You would be able to go 6 months before requiring a new job. This goal is a great foundation to have before any other financial goal.

Financial Independence

This is a very broad term which covers everything from being debt free to having enough saved up to retire early. The main thing about this goal is that it allows you to live without worrying about your finances.

This is generally achieved where someone's investments (assets) produce enough of an income to cover all expenses. This of course varies from person to person and there are many different assets to invest in.

I would say if you are to go after growing your assets then you should already have an emergency fund setup to your goal. This means you won't be forced to sell out of your investments when you may not want to for unexpected payments.

The most common types of assets people invest in a real estate,  stocks and shares including mutual funds, ETFs, etc. and people starting there own businesses where the business is an asset. Stocks and shares tend to be the easiest to get started with as there are many apps that allow stock investing now. Checkout my blog below where you can checkout some investing apps:

What are the Best Stock Trading and Investing Platform's UK (2022)
 

That being said, it is not easy to invest in the stock market and you can very easily lose your money if you don't know what your doing. If you plan to get started in the stock market be sure to do lot's of research and know what your getting involved in. In my blog I share my experience over 4 years and what I think is useful information.

I am however, not a qualified financial advisor. So for any advice on how to invest or anything else please consult a professional. Any thing I do talk about is my personal experience and is not to be taken as financial advise.

Summary

An emergency fund is a great place to start building your wealth. It will help you avoid unnecessary stress when something goes wrong. A good amount to set aside is around 3 month of living expenses. Once you reach this point you will be ready to take on any goals you have.

If you found this post helpful, feel free to subscribe to my blog so you never miss another post. For any feedback, comment down below and I will reply as soon as I see it. Checkout some of the blogs below for more content like this.

Thanks for Reading 😀

FAQ

What Is a Financial Goal?

A financial goal is a target to aim for when managing your money. It can involve saving, spending, earning or even investing.

Source: (credit.org)

What is a good net worth by age 30?

It's generally recommended that you have at least half of your annual salary saved in a retirement fund by age 30. This provides a good starting point for building your net worth over the following decades.

Source: (thebalance.com)

Why financial goals are important

Financial goals will remind you of the reasons why you are choosing a particular financial journey. Intentional spending won’t feel like deprivation when you reduce your clothing budget or when you choose to cook dinner at home instead of calling a food delivery service.

Source: (clevergirlfinance.com)