The importance of money couldn’t be underscored enough during the past two pandemic-stricken years. While you’re facing the uncertainties of the future, the truth that money is volatile and that it burns easily has become much clearer than ever. You’ve also come to realize that you need to learn not only how to make money but also how to keep it and make it work for you.
The past months may have made financial independence sound elusive. But that shouldn’t be the case now. If you think that you’ve committed financial blunders during the past months, here are five words to comfort you: it is not too late. You still have time to correct your mistakes and start anew.
And hey, you’re reading this article! That should count for something. You’ve made it this far, and you’re well on your way towards financial recovery and freedom.
To help you make your 2022 the best one yet in terms of personal finance, here are 22 goals that you should take note of.
What is a Financial Goal and Why is It Important?
A financial goal is simply a target, whether it’s savings, investments, or personal growth, that you want to achieve over a definite period. Generally, it involves steps and strategies that will ensure that your future will be stable and secure.
Here are a few reasons it’s important to set financial goals.
1. It Gives You an Idea How Much You Need to Save or Invest
Your financial goal is basically the big picture. To achieve it, figure out how much money you’re supposed to make, earn, or invest.
Take this one situation for example. If your goal is to travel to Japan next year, you’ll find out while budgeting that you’ll need to save about PHP 30,000 to PHP 50,000 to have a great trip and a comfortable buffer.
2. It Will Make You Realize That Not All Goals are the Same
As you plan for the future, you’ll realize that not all goals have the same level of value and importance. Therefore, you’ll realize that each goal will require a different approach or strategy.
If you want to save for your kid’s college education, you’ll know that it’s wise to start investing early in aggressive funds with a long-term horizon. On the other hand, if your goal is to raise funds for the down payment for a new home, you’ll realize that it’s necessary to find a part-time job to create another stream of income.
3. It Determines the Future of Your Career
Your financial goal can influence the choices that you make when it comes to your career. For example, if you want to protect your and your family’s health, you’ll definitely want to work for a company that offers a comprehensive healthcare plan.
Similarly, if you want to climb up the corporate ladder, you’ll need to invest in personal growth activities, such as taking an MBA degree or completing a management training program.
What Makes a Good Financial Goal?
Borrowing some key principles from the corporate and business world, every financial goal should be SMART, meaning it should be specific, measurable, attainable, relevant, and time-bound. The SMART acronym is not just the standard for your financial goals. It will also be your how-to guide.
Say that your goal is to build an emergency fund. This is how you’re going to set it using the said parameters.
- Specific – Your specific goal is to save PHP 100,000 within a year.
- Measurable – Since your goal is to build the PHP 100,000 cash reserve in a year, you’ll need to have a target monthly saving of PHP 8,500.
- Attainable – Ask yourself if the monthly PHP 8,500 saving is attainable with your current paycheck. If not, you’ll need to make some adjustments or cut corners, such as sticking to a smaller daily budget, biking to work instead of driving, or curbing your frappe or milk tea cravings.
- Realistic – Ask yourself again if the monthly saving of PHP 8,500 is feasible after carrying out your initial money-saving measures. If not, you’ll have to make it realistic by taking significant steps, such as getting a higher-paying job, starting a business, finding a part-time gig, or asking for a promotion.
- Time-bound – One year is your target. But if it’s not feasible, you can always extend it to a year and a half, or even two years. Even if you make some adjustments, you must ensure that your financial goal has a deadline.
22 Financial Goals to Set This 2022
The 22 financial goals listed below are generally categorized based on your age or your current life stage. Nevertheless, you can blur the lines and pick the goals that work for you regardless of your age.
List of Financial Goals for Those in Their 20s
Goals for young professionals in their 20s who are managing their own hard-earned money for the first time. Those who want to go beyond savings and emergency funds may also be inspired by the goals listed here.
1. Arm Yourself with Financial Knowledge
Arming yourself with knowledge will make the creation of financial goals a whole lot easier. You may want to start with the light ones, such as the guides written by Chinkee Tan and Bo Sanchez.
But if you’re looking to advance your knowledge, you can read the books recommended by Investopedia or any leading financial publications. Nonetheless, you can always go for free online resources, such as The Nerd Wallet, Wise Bread, and of course, Moneymax.
2. Build Your Savings and Emergency Fund
Saving up should be a default activity for 20-somethings. But other than having a savings account, you have to build a separate cash reserve that will help you weather the rainy days. This is called an emergency fund.
Unexpected things happen all the time. Your car breaks down. You lose your job. Your dog falls ill. When you have a separate emergency fund, you won’t have to tap into your savings to deal with these dilemmas. You also won’t have to borrow money.
As a rule, your emergency fund should be equivalent to three or six months’ worth of your living expenses or income. You have to increase it in case you have a family or dependents.
- Ipon Challenges to Help You Hit Your Financial Goals
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3. Start Protecting Your Health
Now that you have built your savings and emergency fund, you may be excited about dabbling in investing. Not so fast! First, you need to protect your greatest asset: your well-being. You can’t make money when you’re not healthy. And if you get sick, your money will burn faster.
Start leading a healthier lifestyle as early as now. While you’re at it, maximize your employer’s healthcare plan. Better yet, get your very own health and life insurance policy, so that you’ll be liquid in case you fall ill or you get hospitalized.
4. Start Investing
Once you’ve secured your emergency fund and added another layer of financial protection (your health insurance), then you can start investing. Take baby steps by considering Variable Universal Life insurance (VUL), which is basically a life insurance policy with an investment component. You may invest a portion of your income in mutual funds and bonds. You may also try stocks if you’re willing to take some risks.
However, at this point, you must stray from precarious and volatile investments, such as cryptocurrencies. Their quick fluctuations may cause you to panic, which is not a good emotion to handle for investment newbies. Stay on the safe side for now and only invest in things that you know.
5. Start Building Your Credit
Your credit score is a three-digit numerical value that lenders use to determine your repayment capability. The higher the score, the more creditworthy you are. Building a high credit score should be included in your list of financial goals since you’ll eventually need to borrow a large amount of money to buy a house or a car. Usually, those with high credit scores are able get loan deals with favorable interest rates and friendly terms.
If you want to start building your credit, you may consider getting a credit card and use it responsibly. Pay all your credit card dues on time. In case your loans are issued by institutional lenders, settle them as quickly and efficiently as possible if you want your next loan to have friendly terms.
6. Create Another Source of Income
Having a part-time gig or a small business will not only be beneficial for your piggy bank. It will also unleash your hidden talents or provide you with an avenue where you can monetize your passion.
Moreover, you’ll also acquire new skills that will increase your marketability. When you have a high job market value, you can demand for a much bigger compensation package.
7. Start Building Your Retirement Fund
As you near your mid-20s, you’ve got to start building your retirement fund. You’re off to a good start in case you have a few investments since their earnings can be stashed away for your post-employment era.
Nevertheless, a portion of your earnings from your part-time gigs or business can be put towards this particular cash reserve. You also have to make sure that your contributions to Pag-IBIG and SSS are duly remitted to the concerned agencies by your employer.
8. Invest in Yourself
You always have to think of yourself as a money-making asset. To make yourself attractive to high-paying employers or talented business partners, you need to have the skills that they’re looking for.
If you’re working in a corporate setting, invest in yourself by undergoing training, such as Six Sigma Certification. Want to move up the ladder and improve your business acumen? Consider going back to school and taking up an MBA or its equivalent. You may also want to take advantage of in-house training and classes offered by your employer. You get the drift.
List of Financial Goals for Those in Their 30s
Those who are in their 30s generally have built a solid financial foundation. They already have their savings, a few investments here and there, and some mechanisms that will shield them from the uncertainties of the future.
If you’re a financially wise and stable 30-something, you can make your goals bigger and bolder. Here are some ideas:
9. Get a Higher Paying Job or Switch Careers
Feeling undervalued and underappreciated at your current company? Speak up and ask for a raise. Just make sure that you have a solid track record that will justify your demand. But if your managers still can’t see your value or effort, don’t waste your time―file your resignation and get a higher paying job.
You may also get disenchanted with your current career. You feel that the work that you’re doing isn’t aligned with your values and goals anymore. If that’s the case, consider switching careers. Just a caveat, though: changing your career will mean stepping out of your comfort zone.
A good transition plan can let you slide into your new career with minimal adjustments. For instance, if you’re an accountant who wants to go full-on with your cookie business, start baking on a part-time basis and gauge the amount of time and money that the business requires. When you’ve established a solid business workflow and acquired enough funds, that’s the time that you can resign from your job.
10. Reduce or Eliminate Debts
Maybe you’ve bought a car or you’ve taken out a loan to fund your travel abroad. On top of that, your credit card debts are piling up. When your debts are out of control, you’ll notice that they take a toll on your financial health. With that, you need to get rid of them one by one, or at least make them manageable.
One effective way of managing such liabilities is through debt consolidation. With this method, all your existing debts will be rolled into one payment so you’ll only have one due date to think about every month. Better yet, stop accumulating debts by living within your means, curbing your impulse purchases, and avoiding “interest-free financing.”
11. Buy a Real Estate Property
When you reach your 30s, you have more assets and a larger income than when you were starting out. You can now invest in assets with bigger price tags. Real estate is one of the best investments you can make since property most likely appreciates, especially if you have a long time horizon. This is also a sensible investment if you’re planning to start a family.
Also, there are multiple ways to make your money grow through real estate. You can rent it out long-term or lease it via booking sites, such as Airbnb.
12. Plan for Marriage and a Family
The 30s may be the peak of your career, so take advantage of the large amount of money that you’re earning. Start setting some cash aside for important milestones, such as starting a family.
Marriage is usually the first phase, and it can be very expensive. Nevertheless, you can always opt for a simpler ceremony.
The second phase is moving out of your family home and living with your spouse. This will require a considerable amount of money, especially if you’re buying your very own property.
When you decide to have children, you’ll need to make some necessary adjustments, too. These include saving up for childcare and education. You’ll also have to include your kids in your insurance coverage.
13. Diversify Your Investments
The excess in your earnings provides you with an opportunity to expand your investment portfolio. Assuming that you already have solid investment knowledge and enough buffer, you have the chance to try more aggressive assets without worrying about losing.
Go beyond mutual funds and stocks by investing in dollar funds or foreign stocks. You may also try forex trading and crypto, although we recommend that you always do your due diligence before going into it.
If you want a tangible approach to your investment, consider starting a business or funding a start-up. For the latter, there are crowdfunding platforms that you can use, such as Investree or Cropital.
14. Make Necessary Adjustments in Your Insurance Coverage
In your 30s, you need more than a life insurance policy. You’ll realize that you’re more exposed to a lot of risks, and you can’t afford to be hit by them. Update your insurance coverage, especially if you have new assets to protect.
If you have a car, get a comprehensive policy on top of the compulsory third party liability insurance (CTPL). The same goes for your house and business. You may also want to get a disability insurance policy in case an accident renders you incapable of working for quite some time.
15. Boost Your Retirement Fund
You can do this in a few ways. First, put a portion of your investment’s earnings towards your retirement fund. Second, increase your monthly contributions to Pag-IBIG and SSS. Third, if you have a VUL, increase your premium payments. Fourth, save up what’s left of your monthly income. Lastly, set aside the windfalls that will come your way, such as tax refunds, bonuses, and even inheritance.
16. Plan Your Funeral
Sounds grim, eh? You need to acknowledge the fragility of life. In case you pass on, your family will need to cover the funeral expenses. And you don’t want them to use the insurance proceeds to pay for your funeral expenses. Spare them the trouble by acquiring your cemetery plot and getting a memorial plan early on.
List of Financial Goals for Those in Their 40s and Above
The nature of your financial goals in your 40s should be all about sustaining and strengthening what you’ve built in your youth. And as gray and white hairs start to grow, you’ll need to look again at your priorities, change them, or get rid of some of them. This is also the point where you’re supposed to plan the way you’ll leave your legacy.
17. Reassess Insurance
Now that you’re closer to retirement, your priorities have changed. You become increasingly concerned about your health and your kids’ future. Look again at your goals and accomplish those that are immediately needed. For one, ramp up your health insurance coverage, as you’re more likely to get sick.
Especially if you’re the breadwinner, you may need to consider disability or accident insurance. This ensures that your family will be protected when events arise that disable and hinder you from working. If you have a child, update your life insurance policy and include your kid.
18. Finish Your Mortgage
Whether you’re in your 40s or 50s, you know that your mortgage will soon be over. But you can speed up the process through a variety of ways. For example, make extra principal payments using the earnings of your investments or windfalls from your job or business. Go for a lump-sum payment if you can. You can also refinance your mortgage to a shorter term with a lower interest rate.
19. Start Writing Your Will
Some legal and financial experts advise that you write your will while you’re young and strong. But if you have delayed it up until this point, don’t worry, you still have time.
Having a will gives you the peace of mind that your loved ones will be taken care of when unforeseen events happen. It will also help keep family conflicts at bay since all your assets are already specifically divided among your loved ones.
In case you have an existing will, it’s important to update it when certain events happen, such as an increase in assets or additional family members coming in.
20. Streamline Your Investment
With more expenses to consider, such as your mortgage payment or your child’s tuition, you can’t be as risky as you were back when you had fewer responsibilities. As such, you need to transfer your investments to less aggressive instruments.
If you have cash in stocks, you may want to transfer a large portion of your earnings to mutual funds or bonds. Nevertheless, you can still retain some money in stocks and even crypto, provided that this investment doesn’t make up the majority of your portfolio.
21. Consider Downsizing
In case you’re in your mid- or late 60s and already an empty-nester, you may realize that living in a large house is impractical since maintaining it can be expensive. You’ll find downsizing truly appealing.
You have two options here. First, sell off your home and buy a smaller one. The excess can go to savings or your investments. Second, leave your home, have it rented or leased, and rent a smaller and cheaper place for yourself. This strategy turns your real estate property into an income-generating asset.
22. Plan What You’ll Do After You Retire―From Budgeting to Having Fun
Fearing that you won’t be able to enjoy your money before you die is just rational. But if you come to think of it, there are far worse fears than that. Like outliving your savings and retirement fund.
Before you finally retire, list down all the sources of your retirement fund, from savings to pensions and investments. Then list down the possible monthly expenses that you’ll incur once you retire. After that, create a monthly budget based on your expenses and the passive income that you’re expecting to receive.
Also, you need to plan what you’ll do with the inordinate amount of time you have in your hands. You have a lot of options: you can travel the world, find a new hobby, visit old friends, or do anything you please, as long as your budget permits it.
Money can’t buy happiness. That’s undeniably one of the most prominent financial adages that have endured the passing of time. To some extent, this is true. But as you grow older and more pragmatic, the more you’ll also realize that money can actually buy comfort, peace of mind, and time. All of which are important for living a happy life.
This truth will make you realize that achieving financial security and stability is actually one of your ultimate goals. To end up attaining this goal, you need to break it down into manageable pieces and steps―and all of them are listed above.
Keep on reading our guides and articles here on Moneymax not just to enrich your financial knowledge but also to give yourself an idea of how to come up with financial goals and how to achieve them.